How Do I Choose the Best Student Loan to Pay for College?

Many students (and their parents) have to borrow money to pay for college. Today’s average student graduates after four years owing about $25,000 – and many students owe much more! Of the federal, state-based, and private student loans, which type is best for you? Here are some guidelines to help you evaluate your loan options:

1. Consider federal and state student loans first. Government loans have the most favorable repayment terms and interest rates. They also have the most liberal deferment and forbearance options. Wondering what those terms mean? Visit our student loan glossary.
2. Next, consider private loans. If you are unable to borrow a federal or state loan, or if you need additional loans, consider a private student loan from a trusted bank or other financial institution. Private loans usually require borrowers to pass a credit check or have a creditworthy co-signer. Explore private loan options before using high-interest credit cards or home-equity lines of credit to finance an education.
3. Credit cards are a last resort. You can pay for college expenses with a credit card, but their interest rates are usually far higher than those that the government or banks will charge you.

Even small differences in interest rates can really increase the total amount you must repay. Check out this chart which shows the different total costs for a 10-year loan:

Loan Type	If you borrow:	At this interest rate:	Estimated Monthly Payments:	The total cost of the loan is:
Federal or State Loans	$10,000	7%	$116	$13,920
Private Loans	$10,000	11%	$138	$16,530
Credit Cards	$10,000	17%	$174	$20,880

Interest rates are an important factor to consider when selecting a loan, but look at other aspects too, such as repayment terms. Download Selecting the Best Loan to help you can