Those who sign up to take out student loans for college typically understand that once they graduate, they'll be on the hook to pay them back. But data from online lender Laurel Road reveals that many younger borrowers aren't at all clear as to what taking on student debt entails. 

In fact, only 44% of millennials with student loans say they completely understood their repayment terms before officially taking them on. And more than 33% of younger borrowers admitted that they didn't even understand some of the basics associated with student loans -- concepts like monthly payments, interest rates, and refinancing

A female college student studying at a desk in the library.

Image source: Getty Images

Unfortunately, younger female borrowers are even more likely to be in the dark, with 37% of women not understanding basic concepts related to student debt, versus 20% of men. 

If you're iffy on what you actually signed up for in the way of student loans, it's imperative that you get schooled at once. That way you'll be better prepared to keep up with those payments once they start to be due, and be able to manage them if you're already in the midst of making them. 

Student loan repayments 

When you take out federal student loans for college -- those obtained through the U.S. Department of Education -- you're given a six-month grace period after graduation before you have to start paying them back. This means you're not required to make payments during those six months (or during your studies, for that matter), but once that grace period concludes, you're liable for monthly payments. 

If you took out private loans for college, you may or may not have a grace period, and it may or may not be six months long. Many private lenders conform to the six-month standard set by federal loans, but you'll need to check the terms of your loan agreement to see when your first payment is due.

Student loan interest

The amount of money you're required to pay your lender each month is calculated according to the total sum you borrow multiplied by the interest rate attached to your loan. If you took out federal loans, that rate is both reasonable and fixed. The rate currently ranges from 4.53% to 7.08%, though your rate may be a bit different depending on the exact date your loans were issued. If you borrowed privately, you could have a substantial interest rate attached to your loan -- as much as double the federal loan rates. And private student loan interest can be variable, so while you might start out with a reasonable interest rate, it can climb over time. 

Again, be sure to read your loan agreement to understand what sort of interest you signed up to pay. You can also use an online loan repayment calculator to see what your monthly payments will look like if your lender hasn't provided that information. 


Refinancing means swapping one loan for another. You can do it with any loan, including mortgages and student loans. The difference is that the former costs money, whereas refinancing student debt is free. If you took out federal loans, refinancing generally doesn't make sense. That's because the interest rates associated with federal loans are pretty low and reasonable to begin with. But if you took out private loans, trading in your existing loan for a new one with a lower interest rate via refinancing could save you quite a bit of money.

Refinancing your private student debt also makes sense if you have a variable rate attached to your loan and don't want to risk an increase in your monthly payments over time. To qualify for a refinance, you'll generally need good credit, but if your score is solid, it pays to look into it.

Taking out student debt without understanding what you're signing up for is a huge mistake. If you're already there, take a close look at your loan agreement and contact your loan servicer if you have specific questions about your debt. And if you haven't yet taken out loans for college, make sure you understand the terms involved before committing to what could be many, many years of expensive monthly payments.