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Minimize Student Loan Debt: Declining Offered Loans

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Colleges sometimes include the maximum available federal student and parent loans on financial aid notifications to bring the amount of offered financial aid closer to the total cost of attendance. It's not always clear that students don't need to accept the full amount of all loans.

Reducing expenses or increasing earnings to offset offered student loans will mean less debt after graduation. Lower spending and more income can also mean parents may choose to reduce or not take the amount of a federal PLUS Loan for parents. The borrower will need to repay the loan amount along with interest that accrues daily on those loans. And, it won't matter if college doesn't result in graduation, a job or the anticipated earnings. Once the loan has been accepted, the student (or parents in the case of a parent PLUS loan) is responsible for repaying it.

If the offered loan amount seems like more than the student will really need, it's important to decide exactly how much to borrow. Remember that the borrower will need to repay all federal loans with interest. While interest is currently waived on federal Direct Loans, including parent PLUS loans, that is a temporary measure.

Need some, but not all, of the offered federal student loan amount?

Students can always accept only the loan amount they need. To take a partial loan amount:

  • Fill in the desired loan amount on the document to be returned to the financial aid office if a paper copy needs to be signed and returned.
  • Choose the electronic option for accepting or declining each applicable loan, or for taking out a partial loan amount, when accepting financial aid online.
  • Contact the financial aid office if it's not clear how to accept a partial loan.

Can all loans be declined?

Many students have the goal to attend college loan-free. Even if some loans will eventually be needed, declining all loans for one semester will save capitalized interest later on. To decline the offered loans:

  • Cross out the loan amount or select the “decline” option on the document to be returned to the financial aid office.
  • Choose the electronic option for declining each applicable loan if financial aid is accepted online.
  • Contact the financial aid office if it's not clear how to decline loans.

Considering PLUS Loans?

Although PLUS Loans may appear to be part of the offered financial aid, they are not automatically paid to the student or institution. Parents need to request these loans. Your family may wish to compare the terms and benefits of a PLUS Loan with those offered by private lenders, like our College Family Loan.

Parent PLUS loans first disbursed on or after July 1, 2022, have a fixed interest rate of 7.54%, but interest on federally held loans like the parent PLUS loan is temporarily waived due to the COVID-19 national health emergency. Like other federal student loans, the interest rate for new PLUS loans changes annually on July 1.

Private loans, on the other hand, may have different fees or interest rates. Be sure to discuss repayment expectations as a family if parents will be responsible for repaying the PLUS or other loan debt.

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