Properly Selecting a Student Loan and Lender

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Become an Informed Student

When it comes to student Loans, you must put on your educational mindset, perform research and become an informed borrower. If not, you could potentially miss out on easily accessible grants and scholarships and worse, put yourself in a financial quagmire by the time you graduate.

First Things First!

When it comes to financing your education, don’t make the mistake of starting off with tunnel vision, meaning that solely focus all of your attention on acquiring student loans. Although they are great, student loans SHOULD NOT be your first or only option.

Start off finding out about all of the funds available through grants and scholarships offered by workplaces, charities, corporations, ministries, professional organizations, the government, etc. After you have received all you can through these avenues, then your next option is a student loan. Here are some key points to take into consideration:

Student Loan Facts

Start with the federal student loan programs. Federal programs such as Perkins Loans and Stafford Loans for students and PLUS Loans for parents and graduate and professional degree students have fixed interest rates ranging from five to eight point five percent.

Private or alternative loans typically have interest rates that rise and fall with the economy. That means your payments can change with certain economic barometers. And when you’re just graduating from college and attempting to establish yourself in the real world, the last thing you need is to be slammed with payment increases, right? Also, private loans rely on credit reports; federal student loans don't.

How Do You Start The Federal Student Loan Process?

It’s simple; you fill out a “Free Application for Federal Student Aid” also known as (FAFSA), to see which federal loans you can qualify for. Subsidized Stafford loans charge a fixed 6.8 percent rate starting six months after you leave school. If you don't qualify for a subsidized Stafford Loan, don’t fret. your next option is an unsubsidized Stafford Loan, which charges interest immediately but gives you the option of not paying interest until six months after you leave school. Parents and professional and graduate degree students can borrow from the PLUS program at rates capped at 8.5 percent.

Choosing Your Student Loan Lender

When you get a Stafford Loan, your school will give you the option of choosing a lender from their preferred-lender list; only about twenty percent of schools have students borrow directly from the federal government through the Direct Stafford Loan Program; at all other schools, you will need to choose a lender.

Check The Terms and Read The Fine Print Before Signing

The preferred lender list is only a starting place prior to sealing the deal by signing on the dotted line You must check the terms and read fine print carefully. Not all students fit into a lender’s requirements, which means not all students can take advantage of all the benefits lenders offer. Choose the student loan that provides the best upfront discounts, such as waiving the origination and default fees and other immediate discounts. Also, be advised that benefits that are promised several years down the road normally won't apply to you if you consolidate your student loans or if you get into financial trouble.