Read all of the loan's fine print before accepting the terms.
When looking for a loan for higher education, students have many variables to consider before committing themselves to a single source of funds. This is because the arrangements that each student loan company provides are different, based on interest provisions, university allowance, payback grace periods and graduation rewards. Furthermore, student loan stipulations are dependent upon whether the student is the account holder and whether the loan is privately or government funded. Be sure to shop around with different loan companies to ensure that you get the best deal possible.
Instructions
1. Apply for federal student aid (see References). Doing so will automatically make you eligible for grants and student loans, depending on your income and assets. Therefore, you may not need to take out a large private loan to cover the cost of studying. Furthermore, a federal student loan will have a lower interest rate than a private loan, making this a very attractive option for prospective students. A supplementary student loan that many parents take out is known as a Parents PLUS Loan, which is designed to assist the parents in paying the student's tuition. Though this loan comes with a low interest rate, repayments begin immediately.
2. Contact your college to find out the private student loan companies with whom they work. Some universities hold contracts with specific student loan companies, making it impossible for you to borrow money from other lenders. Finding out the banks and private lenders available to you will help narrow your choices.
3. Read potential student loan contracts. One of the first things to look at is the interest rate. The best type is a fixed interest rate, as it will not grow with inflation as a variable rate will. Additionally, see if the annual percentage rate (APR) includes prime, which is the base APR for all loans. For example, some may say that their APR is 3 percent, but it excludes the base of approximately 3.25 percent (as of January 2011).
4. Discover the lenders' policies regarding repayment and decide what module best fits in with your budget. For instance, the loans that require a student to begin repayment immediately end up costing less in the long run, as they do not have any time to accrue interest without payment. However, if your course load is very heavy, then finding a job in order to make these payments may not be an option. In that case, it is best to find a loan with a grace period; grace periods defer payments until you have been out of school for six months before repayment is required.
5. Check to see if any of your potential loan companies offer graduation rewards. Though these are not mandatory, they offer an incentive for students post-graduation. For instance, some loan companies offer a cash reward or an interest rate reduction upon receiving proof of your graduation.
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