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.