Shop Around For Student Loans

Student loans are available to help pay for your education through four-year public and private colleges and universities, as well as community colleges, technical schools and other programs. Student loans are "financial aid", but they aren't the same thing as scholarships or grants, because you have to pay them back eventually (though not usually until you've finished your education).

The nice thing about student loans is the fact that they usually have lower interest rates than other types of loans. To make sure you get the best deal - and aren't stuck paying off your educational debt for more years than you care to count - you need to shop around.

Varieties of Student Loans:

Federal Student Loans
In the United States, there are several types of loans available. Federal student loans can be made directly to students or to their parents. When a loan is made directly to the student, no payments are required until after that student has graduated. The downside to these types of loans is the limits placed on the amount of money you can get. Loans made directly to students are often subsidized by the federal government, though they might not be subsidized, depending on your level of need. Both types are guaranteed by the Department of Education, and nearly all students are eligible, regardless of credit score. With this type of loan, there is a grace period of six months after graduation (or three months after you leave school without graduating) before payments are due.

Subsidized loans are available if you can demonstrate your financial need. The government will make your interest payments while you're still in school, so the amount you borrow does not increase while you're in school. If you are not from a lower-income family, you can still get a government loan, but it's likely to be unsubsidized. That means the government will not pay your interest while you're in school. That interest will accrue, and you'll owe more than the loan principle when you graduate (though you can opt to pay that interest while you're still in school).

Let Your Parents Get the Loan
There are limits on the amounts students can borrow, so if it's just not enough, you can go with a federal loan made to your parents. These are described as PLUS (Parent Loans for Undergraduate Students) loans. These have a much higher limit, which makes sense because your parents usually have established a credit history.

The downside to these loans is that the payments are not deferred until graduation. You have to start paying off this type of loan immediately. Also, it is important to note that the parents are responsible for repayment on these loans, not the student. Parents can work out a deal with their children to require them to repay, but if the student defaults on the loan, the parent must make payments. It's up to you (and your parents) to weigh these options carefully and determine which type of loan is best for you.

Private Loans
Don't overlook private loans, which can be made to students or parents and are available through banks or specialized lenders. These types of loans solve both of the dilemmas of the federal loans: The limits are higher, and no payments need to be made until after you get that degree. However, there's still a downside. Interest on these loans will start to gather immediately, so if you want to defer your payments until post-graduation, you'll have more to pay off. Another difference with private loans, which may present a problem for you, is that they are generally based on credit history---yours, your parents, or both.

Terms of the loans vary depending on the lender, so it is extremely important to shop around to find what is truly the best deal.

Shop Around for the Best Terms
Here's what to pay attention to as you shop around:

• Interest rates
• Deferment (the amount of time after graduation/leaving school before you have to make payments).
• Forebearance (the lender will stop requiring payments when you come upon financial or other hardships).

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