Tips On Finding The Best Student Loans For College

Before considering any student loans, it is highly recommended that students exhaust all of their free money for college options, such as scholarships. Scholarships can provide small amounts of money for college, or they can cover your full college tuition costs (depending on the scholarship). Unlike student loans for college, scholarship money will never need to be repaid. This makes any amount you are awarded in scholarship money, valuable to reducing your overall student loan debt.

Additional Helpful Details:

• Scholarships typically fall into several categories, including merit-based, need-based, athletic, talent-specific, demographic-based, and program-specific awards. Exploring each category can significantly increase your chances of receiving aid.
• Many scholarships allow students to apply every year they are in school, meaning recurring awards can drastically reduce long-term borrowing.
• Students should use multiple search tools (including your scholarship search at CollegeWhale) to ensure they find both national and local scholarship opportunities.
• Local scholarships from community foundations, small businesses, religious organizations, and local nonprofits often have fewer applicants, which can increase the likelihood of winning.
• Tracking scholarship names, deadlines, and requirements in a spreadsheet or planner can help students stay organized and avoid missing valuable opportunities.
• Applying early and submitting strong, proofread applications can help students stand out in competitive scholarship pools.

In terms of the best student loans for college, students are encouraged to start with federal student loans. Federal student loans are considered to be the best, because they are need-based, low interest student loans, that typically provide borrowers with the most flexible repayment terms. To apply for federal student loans, you will need to complete a FAFSA (which is available at www.fafsa.gov). FAFSA is the Free Application For Federal Student Aid, and acts as a gateway to all available federal financial aid for college. By completing a FAFSA not only will the student be evaluated for federal student loan eligibility, but also for federal grant eligibility (grants are a source of free money for college that will not need to be repaid).

Additional Helpful Details:

• Federal student loans generally include Direct Subsidized Loans, Direct Unsubsidized Loans, and PLUS Loans, each with different eligibility criteria and borrowing limits.
• Direct Subsidized Loans do not accrue interest while the student is enrolled at least half-time, during the grace period, or during approved deferment periods.
• Federal loans offer access to income-driven repayment (IDR) plans, which can cap monthly payments at a percentage of the borrower’s income and extend the repayment term.
• Borrowers with qualifying federal loans may be eligible for loan forgiveness programs such as Public Service Loan Forgiveness (PSLF) or Teacher Loan Forgiveness.
• Completing the FAFSA early may increase a student’s chances of receiving limited federal grant funds and certain types of campus-based aid.
• The FAFSA must be completed for each academic year in which the student wishes to receive federal financial aid.

How To Get The Best Private Student Loan

Since federal student loans are need-based, a student may not qualify for enough money in federal loans to cover all of their college expenses. After federal student loans, the next type of loans a student may consider are private student loans. Typically private student loans are not considered the best type of loans for college, since these type of loans are based on a borrowers credit, something many new college students have little of. If you have poor or little credit history, you should consider obtaining a creditworthy cosigner in order to help you secure the loan and possibly receive a better interest rate. Private student loans can be among some of the most expensive loans, so be very cautious to not borrow more than you absolutely need. Follow these simple tips below to help make certain you are getting the best possible private student loan:

1. Compare student loan lenders.
Taking the time to compare different student loan lenders will help ensure that a student gets the best private student loan available. Each lenders private student loan products can be different, with different interest rates, terms, and repayment options. Since private student loans are based largely on a borrowers credit, what may be the best lender for one individual may not be the best lender for another individual. Selecting a number of different private student loan lenders to compare, will help identify what private student loan will offer the lowest interest rates, and best repayment terms based on the borrowers credit profile.

• Use lender comparison tools to view estimated interest rates, terms, and borrower benefits side by side.
• Look for lenders that allow prequalification with a “soft” credit check so you can see potential rates without affecting your credit score.
• Compare borrower benefits such as interest rate discounts for autopay, loyalty discounts, or rewards for on-time payments.
• Review independent customer reviews and ratings to get a sense of overall borrower satisfaction and customer service quality.
• Check whether each lender offers flexible in-school repayment options, such as interest-only payments, flat monthly payments, or full deferment.

2. Review the interest rate.
Most private student loans offer a variable interest rate, meaning the interest rate can fluctuate over time. Borrowers should make certain to understand if the interest rate on the private student loan is variable or fixed, and if the interest rate is variable, what the maximum percentage it can reach is? If the interest rate on a private student loan is too high, borrowers can always try reapplying with a creditworthy cosigner to see if this may help lower the interest rate.

• Always review the APR (Annual Percentage Rate) in addition to the base interest rate, since APR reflects the total cost of borrowing, including certain fees.
• Understand how frequently a variable interest rate can change and what benchmark index (such as SOFR or Prime Rate) it is tied to.
• Ask the lender if they offer fixed-rate options that keep the interest rate the same for the life of the loan, which can make long-term budgeting easier.
• Check if the lender offers interest rate reductions for enrolling in automatic payments or meeting specific credit or income criteria.
• If you are offered a high rate, consider improving your credit (or using a stronger cosigner) and reapplying to potentially qualify for better terms.

3. Review the repayment terms and penalties.
It is highly important for every borrower to completely understand the repayment terms of their private student loan. Borrowers should find out how long they have to repay the loan, what (if any) deferment or forbearance options the loan has, and how often the interest will be capitalized on the loan (interest accrued while in school and/or in times of deferment or forbearance that is added to the principle balance of the loan). Borrowers should also be aware of any and all late fees and prepayment penalties associated with the private student loan.

• Ask the lender what repayment term lengths are available (for example, 5, 10, 15, or 20 years) and how the term length affects your monthly payment and total interest cost.
• Confirm whether the lender charges any origination fees, late fees, returned payment fees, or other administrative costs.
• Check if there are any prepayment penalties for paying off the loan early or making extra principal payments.
• Review how interest accrues while the borrower is in school and how often it is capitalized, as capitalization can significantly increase the total amount repaid.
• Ask if the lender offers cosigner release after a certain number of on-time payments, which can help remove the cosigner’s ongoing obligation.
• Look into whether the lender has hardship options, such as temporary forbearance or modified repayment plans, in case of financial difficulty.