Private Loans | Choose Student Loans On Your Own Terms

As you are preparing to go to college this fall, you might be preoccupied with choosing a computer or shopping for sheets that fit a dormitory bed.

Often less attention goes into selecting college student loans. The decision gets shunted aside or made in an instant because tuition is due, loans have confusing names and the financial aid office at your college might provide little guidance.
Many students assume all student loans are similar – a mistake that can inflict thousands of dollars in unnecessary debt.

Consumer advocates – worried about students coming out of college with overwhelming debt – have been pushing colleges to provide more help to students trying to make loan choices. Some colleges, such as Barnard and Mount Holyoke, have been praised by the Institute for College Access Success for emphasizing the risks of private loans.

But even if your financial aid office isn’t particularly helpful, you can identify the best loans yourself.

Start with a telephone call to your college financial aid office director, and take the initiative by asking whether you might still qualify for any grants or scholarships that you have not yet requested. If you come from a modest-income family, ask about Pell Grants, which can provide up to $5,500 in money that does not have to be repaid. Then ask if you can tap any state grants in your home state or the state where you are attending school. Try calling your state government’s department of education.

If you find you are too late to qualify for a grant this year, put next year’s application date on your calendar. Never pass up free money.

After tapping as much free money as possible, your next step is to choose student loans. You want to turn first to loans from the federal government rather than private loans that come from a bank or nongovernment lender. Again, you should be directed to federal loan applications by your college financial aid office. You can get additional information at students.gov.

The paperwork from your financial aid office will probably give you a choice between subsidized Stafford loans or unsubsidized Stafford loans. There is a huge difference between them. If you qualify, take the subsidized Stafford loans, which carry a $19,000 limit for four years of undergraduate studies. Subsidized means the government reduces your costs by absorbing interest during in-school deferment and provides a very low interest rate, of 3.4 percent. That rate is for loans

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