Skip to main content
All CollectionsPrivate Student Loans
Is it better to take out student loans for all four years at one time or one year at a time?
Is it better to take out student loans for all four years at one time or one year at a time?

It’s better to take out student loans one year at a time.

Sparrow Support avatar
Written by Sparrow Support
Updated over a year ago

It’s better to take out student loans one year at a time.

There are a number of reasons, but the most important is to avoid paying too much interest. Your loan starts accruing interest the moment you take it. Let’s say you need only $1,000 for your first year in college. If you limit your loan to that $1,000, your interest for that first year will accrue only on the principal amount of $1,000. During the second year, the interest will accrue on the initial $1,000 + the next $1,000 that you borrow and so on.

If you take a loan of $4,000 in the first year itself, your interest for the first year will accrue on the full $4,000 during the next four years. Even if the interest is set at a rate amount when you take the loan, this higher interest accrual over the next four years will far exceed any savings from the lower rate of interest.

Did this answer your question?