As a parent, you might spend years trying to prepare your kid for college and the “real world” that comes after it. But experts say many parents overlook a key element of both: student loans.
Students who take out loans to pay for a bachelor’s degree now borrow nearly $30,000, according to a U.S. News survey of 992 colleges. That’s a 58% increase over the past two decades.
Some of those borrowers struggle to pay it back.
New data from the Department of Education shows that 7.7 million borrowers were in default as of December 2025, with that group owing $180 billion, accounting for about 11% of all federal student loan debt.
While many students leave college with a manageable amount of debt and at least a rough plan to pay it off, others graduate unprepared for the burden of monthly payments.
We asked college counselors and financial advisors what parents can do to better prepare students for education loans. Here are their top tips.
[Read: Best Private Student Loans.]
Talk About Money Before Applying
One of the best steps you can take to avoid crushing college debt for both you and your child is to be up front about how much you can pay. This should be done before or during the application process.
“What we’ve tried to persuade people to do is have the discussion about financials earlier in the process,” says Nancy Goodman, founder and executive director of College Money Matters, a nonprofit organization that offers free advice to families about paying for college. “Sit down, and as awkward as it is for a lot of people, lay out for your kid how much you have to spend for their college so that they know right at the beginning, this is how much my parents can afford. That gives the student an idea of what is going to be left for them.”
Consider how much you’ve saved for education and how much your kid has saved or could make by getting a summer or part-time job. Divide that number by four to determine how much of those college expenses you can cover each year. Any leftover costs will need to be covered either by scholarships, grants or student loans. Don’t forget to factor in siblings you may need to help fund in the future.
Breaking down the costs, even at this basic level, can prevent you or your student from taking out too much in loans. It can also help ease the stress.
“What I’ve found is that if people can work to quantify what that potential need is, either overall or by year, then all of this stuff doesn’t feel as insurmountable,” says Andy Smith, executive director of financial planning at Edelman Financial Engines. “You’re not running to the corner and throwing up at 3 in the morning.”
Don’t Be Afraid to Apply to Expensive Schools, but ‘Get Real Early’
You don’t necessarily need to start crossing colleges off your list just yet, even if it appears you can’t afford them. Experts say the most competitive schools often can offer more generous financial aid packages to top students.
“We generally recommend that they look at from three to five schools, not even considering sticker price right off the bat,” says Gene Elder, a financial consultant at Thrivent, the financial services company. “Private schools a lot of times will have more ability to give scholarships and grants and various other things, while public schools might appear less expensive, but they maybe don’t have access to those larger endowments in a lot of cases.”
Goodman also encourages students to apply to competitive schools, as long as students understand they may have to scratch the schools from their list if they don’t receive enough financial assistance.
“It’s OK to apply to schools that aren’t in your financial reach, especially if you’re really smart,” she says. “But get real early.”
Explain How Loans Work and Use Student Loan Calculators
Most prospective undergraduate students likely haven’t taken out a loan before college. Experts say parents can help by explaining the basics of how loans work.
Go over how the interest rate and length of the loan term can affect monthly payments and the overall cost of borrowing. It can be helpful to look at a student loan calculator online to get a sense of how much borrowers end up paying for various loan sizes. While it might be useful to look at the different federal student loan repayment options and how they impact monthly loan bills, students should keep in mind that these can change over time. The Trump administration is phasing out some payment plans and introducing others.
Read the College’s Financial Aid Package Carefully
Schools have long been criticized for sending financial aid offer letters that don’t clearly separate which aid needs to be paid back and which doesn’t. This can cause some people to mistakenly believe that a federal student loan listed in the offer is actually a scholarship or grant.
That misunderstanding can make it appear as if your student only needs to take out one relatively small loan to cover the leftover costs not covered in the offer. In reality, that gap would have to be filled with a second loan, and you or your student could end up borrowing considerably more than you planned.
“People fall for this over and over again,” says Goodman. “They don’t see that there’s a loan tucked in there, and they’re going to have to pay that back. And any additional money they borrow is going to be a second loan on top of that loan.”
[Read: Best Student Loans Without a Cosigner]
Plan for Four Years, Not One
Student loans are often referred to as the last funding option, only to be used after all savings, scholarships, grants and work study avenues have been tapped.
And if you’ve invested money in a 529 account or tucked away college savings in a high-yield savings account, you may naturally want to exhaust those funds before your student takes out loans. But this can actually end up costing you or your child, experts say.
The federal government caps the amount your undergraduate student can borrow each year, and it is not a particularly high limit when compared with the cost of many colleges. Students can borrow up to $5,500 in their first year, $6,500 in their second year, and then $7,500 in their third year and beyond, up to a total limit of $31,000.
But those loan amounts don’t carry over from year to year. Essentially, if you don’t use it, you lose it.
Financial advisors say some families pour their savings in up front, only to run out when their student is in their third or fourth year. At that point, the federal loan might not be enough to cover the year, and the student and parents may have to take out higher-interest private loans or federal parent loans, getting saddled with more debt than they needed to take on.
“The problem is you can’t double or triple up on those loans later on,” says Elder. “It’s really about taking that full-resource picture and figuring out how to pay for four years, not how to pay for today.”
[Read: Best Parent Student Loans: Parent PLUS and Private.]
Plan for Four Years, Not Five or Six
While spending an extra year or two in college may be appealing to some, it can add to your debt burden after school. Goodman tells parents she works with to explain to their students that finishing in four years is the goal.
Extra years mean extra expenses, and those expenses come at a time when your student may have hit their borrowing cap, meaning funding those final years would likely require taking out pricier loans.
“If you take more than four years to finish, you have extra dorm expenses or extra housing expenses, you have extra food expenses and you delay getting into the workforce at a college loan level by a year or two years,” says Goodman. “Nobody talks about this, but it’s really important to bring home to your child the importance of graduating in four years.”
Don’t Go Above the Federal Borrowing Cap
Finally, the experts we talked to say it’s typically a good practice for your student to avoid borrowing more than the federal limit. Federal undergraduate student loans offer lower rates and more generous benefits than most private lenders.
Federal loans also come with the potential for loan forgiveness and income-driven repayment options that can provide relief if you’re struggling to make payments.
“There’s a break point at which it gets a lot more expensive,” says Goodman. “For students, that comes when you exceed the max that the government will lend you.”
More from U.S. News
Student Loan Forgiveness ‘Tax Bomb’: Why You Could Owe $10K or More
Can I Transfer My Parent PLUS Loans to My Student?
Here’s What $100K in Student Loans Will Actually Cost You
How Parents Can Prepare Their Kids for Student Loans originally appeared on usnews.com
