Finding your way through the maze of loan choices can be intimidating but it will pay off in the long run: the difference between the best loans and the worst can be thousands of dollars.
Use the following seven tips from the experts offer important student loan information to keep you out of trouble and on the path to saving money:

  1. File the FAFSA federal aid form as soon as possible in February after you get your tax forms. The ShortCut “Ace the FAFSA: Tips and Lifesavers for Maximizing College Student Financial Aid” will show you how. For background on the benefits of filing the FAFSA, read “FAFSA Helps Families Access Four Types of Financial Aid for School.”
  2. Don’t borrow more than you really need. Your financial aid award letter will tell you how much loan aid you qualify for. Some students borrow less than the maximum to save themselves future payments; some borrow more. Before doing either, ask for advice from a financial aid counselor at your college. Note: Borrowing more than the standard maximum without the approval of your school’s financial aid office can put your other aid at risk.
  3. Investigate sponsored loans. Some colleges, states, employers, and scholarship groups provide special private loans at rates that are even better than some federal loans. But you’ll have to check scholarship directories to find them. A good place to start looking is the ShortCut “Find Free College Money on the Web: The Top Ten Sites.”
  4. Apply for loans accurately and on time, or you might not get the money before your first college payment is due. Also, if you’re applying for private loans or the federal PLUS loan, make sure there are no errors on your credit report that can affect the rates you’re eligible for. You can get your report free at Annual Credit Report.com.
  5. Consider career choices in your loan plan. Some careers will pay better than others and make it easier to make your monthly payments. And some service opportunities such as the Peace Corps, Teach for America, and the military may provide loan forgiveness programs for special public service.
  6. Compare loans. Knowing how much money you can borrow may seem like the most important piece of student loan information you need, but consider all these factors to save the most money in interest and fees over time:
  • Interest rate. The lower the better, but also consider whether the rate is fixed (stays the same throughout the life of the loan) or variable (can increase or decrease based on federal interest rates and other factors)
  • Interest accrual. Subsidized loans don’t begin to accrue interest until graduation, which saves a lot of money. Subsidized loans are awarded based on need, however.
  • Fees. Some lenders charge processing fees that you either pay up front or that are taken out of the amount that you’ve borrowed. So make sure you know the exact dollar amount of your fees.
  • Repayment options. For some loans, repayment starts sixty days after the first loan check is sent, but others can be delayed until months after graduation—or longer if the borrower encounters an economic hardship. Flexibility is good, but it comes at a price: find out how much this option adds to the loan amount. When comparing  repayment options, be sure to ask the following questions: When does repayment start? Is the date flexible? How long will I have to pay off the loan? Are there any penalties for paying off the loan early? And are there any incentives for on-time payment?

 
 

Source: Christine MacDonald, The Detroit News.