Shop Till You Drop: How to Find the Best Student Loans

By Elizabeth Hilfrank on July 20, 2017

Getting ready to head to college, whether graduate or undergraduate, is exciting, but figuring out how to pay for school … not so much.

There’s a lot to consider when it comes to financing education, and there are many options for student loans. Here are some things to consider when looking.

1. Shop around

Before even giving the aspects to look into when applying for loans, it’s important to mention that you should really take your time to shop around. With private loans especially, companies may advertise lower rates than will actually be true once you sign up. So, do your research and ask around!

2. Federal loans and the FAFSA

It is highly encouraged that everyone fills out the FAFSA or Free Application for Federal Student Aid. This application will give you the opportunity to earn federal loans, and it is what universities use to determine your financial need.

Federal loans tend to be the most stable and the most predictable loans with the lowest interest rates, but they also come with origination fees (more on all of this below). They also allow periods of deferment if you cannot pay back the loan during any given time (i.e, during unemployment).

There are three different types of loans you may be able to receive through this process.

Direct subsidized loan – This option is the best type of student loan to receive, but it is only available to undergraduate students, and it requires that you demonstrate financial need. Your school will determine how much you are allowed to borrow, which cannot exceed your total amount of need.

The U.S. Department of Education will pay the interest on your loan throughout your four years at college and for six months after graduation, along with during any deferment periods.

Unsubsidized loan –- An unsubsidized loan does not require that you demonstrate financial need, and it is open to both undergraduate and graduate students. Your school determines how large of a loan you will receive based on the total cost of attendance in addition to any additional aid you are already receiving. The main difference between this loan and a subsidized loan is that you are required to pay the interest rate at all times.

Plus loans – If you are an undergraduate student, your parents can apply for a parent plus loan; and if you are a graduate student, you can apply for the graduate plus loan. These options serve to fill the gap in the cost of attendance that has not already been served by other loans. The maximum loan amount you are able to receive is your entire cost of attendance, and the U.S. Department of Education lends you the loan.

3. Private loans

If you are unsatisfied with the amount of aid you receive from the government, there are many opportunities for private loans as well. If you choose to apply for one of these student loans, you should take all of the aspects that make up the federal loan into consideration, such as:

Interest rates – As said above, federal loans tend to have low and stable interest rates, but this is not the case for every loan. Try to find a loan with low interest rates because you don’t want to end up spending any more cash than you have to.

Also, these interest rates can be fixed or varied. A fixed interest rate is like the ones offered by the government; it will be the same rate every month. With a variable rate, the rate may be very low one month, and then skyrocket the next month for reasons unknown to you. So, think about how much of a risk you want to take.

Origination fees – An origination fee is a fee that you pay at the start of the loan. It appears as a certain percentage of the total loan. Federal loans have this, but it is much less common with private loans.

Affordability – Make sure that you can actually afford the loan. According to Forbes, no more than 15 percent of your monthly income should go towards your loans if you want to be confident that you will always be able to afford them. So, when choosing which loan to apply for, think about what you want to do after you graduate. Try to estimate what that salary would be, and make sure your total loan cost is less than your first year starting salary if you hope to be debt-free within 10 years.

Public service loan forgiveness – If you are considering a career working for a non-profit or with the government, some of your affordability considerations may change. Some careers, such as a public school teacher, fireman, policeman, military man, or defender and the like offer loan repayments based on income, so it is OK if your loan is a little heftier than your initial salary.

That being said, you have to make sure you want to be in said career for at least 10 years. After 10 years, your loans may be forgiven or taken care of by your company. So, check to see if your loan would fall into this category.

It can be overwhelming to look at the sticker price of higher education, but there are organizations willing to help. Take your time to make lists of student loan options and the aspects listed above, and talk to people who have gone through the process. If you still have questions, try talking with a financial advisor. Good luck!

I'm a junior at Gettysburg College with a self-designed major called Writing and Performing Media, and I am a Spanish minor. When I'm not studying, I'm probably running with the cross country or track team, hanging out with my sorority, Alpha Delta Pi, looking at pictures of my dog or eating (mostly desserts). I love all things journalism, and I have a strong passion for storytelling.

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