How to Choose the Loan that's Right for You
Once the financial aid office has evaluated your FAFSA information, you will receive an "award letter". In the award letter, the programs and award amounts will be listed. You may accept or decline any or all of the offerings. If you are offered a loan, you may decline or reduce the amount offered. Use our loan calculator to estimate monthly payment amounts once the loan enters repayment.

Two of the best loan programs are the Federal Perkins and the Subsidized Stafford Loan. Because no interest is due while you attend college, these are the most favorable loans. Plus, the Perkins loan is a 5% fixed interest rate loan that offers cancellation provisions for serving in certain career areas. However, the Perkins loan is only given to students who demonstrate exceptional financial need. The next best loan choice is the Subsidized Stafford Loan. The interest rate is variable, but will not exceed 8.25%. The federal government pays interest while you are in college. Plus, many lenders offer borrower benefit programs that can greatly reduce the cost of paying back the loan.

Next, look into the Unsubsidized Stafford or Direct Loan, which is not based on "financial need". The interest accrues from the time the loan is disbursed. Use the Federal Loan Comparison Worksheet for a side-by-side comparison of the Federal Loan Programs.

After you have taken out the maximum amount of student loans, the next step is to look into parental loans. The PLUS program is the standard against all other loans should be judged. Use this information to compare other loans available from commercial lenders (including home equity loans), state programs, or colleges themselves. Choose the one that offers the best terms after all up-front costs, tax advantages, and the amount of monthly payments are considered. Use our education loan comparison worksheet to do a side-by-side comparison of the various loan programs.