Here is a guest post by Jonathan Burdick, dean of admission and financial aid at the University of Rochester. 

(Butch Dill/Associated Press)

Seeking several thousand dollars in student loans can be a challenging task for a wide-eyed 18-year-old who is about to graduate high school. In most cases, funding a college education is by far the most expensive purchase they will have made to date. But while it may seem like a daunting task, following these steps will arm students with additional knowledge to protect their financial future.

1. Find a financial role model.

Before getting a loan on your own, you’ll want to talk to someone whose financial counsel you trust. Your parents will probably be very useful directing you to such a person, given both their collective financial experience and their concern for your best interests. Have a frank conversation with your parents about money management, and then politely ask them whose financial advice they trust the most — that’s the person you’ll want to talk to.

Shop around for someone who demonstrates to you that they are smart about saving, borrowing and investing, and then keep that person as a mentor during college and beyond. Check yourself against the example of your financial role model — seek out his or her advice, and more importantly, put it to use.

2. Don’t be afraid to borrow.

A good college experience — not to mention a good life — requires taking risks, and some of those risks are inevitably financial ones. For instance, even amidst the recent financial crisis, purchasing a house with a mortgage is still a smarter move than renting for twenty years. Likewise, borrowing a moderate amount to help finance your college education is both commendable and wise.

It’s a wise investment for you, because you’re increasing your long-term earning power; it’s a wise investment for banks, because a student at a good college is a good long-term risk; and it’s a wise investment for the country, because securing a quality education for young, able students is foundational to a thriving society. Don’t feel you have to settle for the cheaper college you don’t much care for when your dream school is within reach, albeit with the aid of a student loan. Wise borrowing at a reasonable level in order to attend the college where you feel “most likely to succeed” is far better than avoiding all risk.

3. Don’t take more loans than you have to.

Loans are a wise choice only inasmuch as they can bring you greater returns in the future. Loans should be used for unavoidable expenses such as tuition and fees, room and board, and perhaps sometimes books. An amazing summer internship — the kind you can build a career or a fellowship on — might be a rarer, but still viable, reason. However, neither the proverbial pleasure cruise, nor the latest electronic gizmo, nor a car should ever be the outcome of an educational loan. The returns on those items do not justify the attendant financial risk.

4. Live within your means, even if you have a credit card.

If you’re looking to pay off a credit card, your first step should never be to take a student loan. Instead, hold off long enough to think the issue through clearly. Suze Orman might tell you that swapping credit card debt for a student loan to get a reduced interest rate is prudent financial management, and she’s not wrong. It’s logical. However, it’s also the sign of a much deeper problem.

If you find yourself contemplating a student loan to relieve credit card debt, first go to your financial role model. He or she will likely shred your credit cards and help you set up a new monthly budget in which you live within your means. Only after you’ve taken those steps should you consider whether it makes sense to take a low-interest student loan to pay off the leftover revolving debt.

5. Tread carefully around private student loans.

Student loans are offered by a variety of institutions, including both government-sponsored enterprises and private companies. A watchful comparison of the terms offered by various groups before taking a loan can save you from an imprudent arrangement. When you see a flashy television ad from a financial services company encouraging you to take a student loan from them, ask yourself: how is that company paying for that ad? The answer, too often, is by burdening young borrowers with penalties, fees, and unreasonable interest rates. If you take private loans at all, look for reliable, vetted companies that you’ve found through research with your financial aid office or via the recommendation of your financial role model.

The take-home is to be thoughtful about borrowing.  Student loans when used properly can lead graduates to a huge payoff over the course of a professional career. But they are not free money without consequences.