Picking the Perfect Loan

Compare student loans to find the best match for you

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Think picking the perfect college was hard? Try picking the perfect loan. Like schools themselves, student loans vary tremendously in terms of size, quality, and student requirements. Here’s a brief breakdown of how to compare student loan packages:

Check the Interest Rates

Here’s where federal student loans trump private loans almost every time. Unlike private loans, loans from the government have fixed interest rates—6.8 percent for Stafford Loans, 5 percent for Perkins Loans, and 8.5 percent for PLUS loans—that are significantly lower than those from outside lenders where rates can run as high as 20 percent. All undergrad students may borrow up to $27,000 under the federal Stafford Loan program; however, students must financially qualify for additional government funds. If you need more than $23,000 to finance your education, try scoring Perkins or PLUS loans before turning to private lenders.

Check the Hidden Fees

In addition to the principal amount and interest, you’ll also have to pay origination, disbursement, default, and administrative fees. These vary from lender to lender; however, students almost always receive the best deal when they opt for federal over private loans. While Stafford Loan and PLUS fees are set at 4 percent, Perkins Loans have no fees at all. On the flip side, private loan fees can range anywhere from 0 to 15 percent, costing students thousands over a 10 to 20 year loan period. Before signing on to a loan, ask your lender to calculate the total amount you’ll have to pay back, including interest and fees.

Check the Stipulations

Scoring a loan is only part of the battle. Maintaining it is the other. In addition to paying back the principal amount plus interest and fees, some loans also requires students to remain full-time students for the duration of the loan as well as maintain a minimum GPA. While you’re investigating your academic responsibilities, ask about your postgraduate fiscal responsibilities as well. Though the Stafford and Perkins Loans won’t require you to begin payment until after you graduate, PLUS and many private loans require payments to start immediately. Before becoming an official loan recipient, compare rates, read the fine print, and ask your loan representative to outline (in print) exactly what they expect from you.