About half of all college students in the United States will get a loan while they are in school. There will be a lot of debt out there, but it will be for a good cause. Many of us have to take out student loans because it's getting harder and harder to pay for school. So, if you decide that you need a student loan to get through school, think about what you want in a lender.
If you work with the right lender, paying back your loan won't be too hard. A bad one can cause a lot of trouble with money. Interest rates and fees on all federal student loans must be the same. Some lenders give you extra incentives to pay back your loans on time, such as discounts for paying on time. You can get these if you set up your bank account to make monthly payments automatically or if you make all of your monthly payments on time for 12 to 48 months. When it comes to paying back loans, auto-debit has a higher success rate, but students should always make sure they have enough money in their account to cover the bank draught. Students won't be able to get these discounts if they miss or pay late even once.
Not all student loans are the same. Federal Stafford loans are some of the least expensive loans you can get, and you can choose when to pay them back. You can only borrow a certain amount, though. If you need more money, you can ask your parents about getting a PLUS loan for you. They are also fairly cheap, but if the student doesn't pay back the loan, the parents are on the hook, just like if they co-signed for a private education loan. Some of the most expensive student loans are private loans. Most of the time, they have higher interest rates, but they let students borrow more money. (That doesn't mean it's always good!) Last but not least, credit card debt should be a last resort. It costs a lot, especially if you carry a balance from month to month, and it can stay on your credit report for a long time. Start with a Stafford loan. If you really need to more, check out the other options carefully before making a decision.
Another area where some lenders are clearly better than others is customer service. The government can make sure that lenders follow rules about interest rates, but it can't make them nice to work with. Visit the financial aid office at your school to make sure you choose a good one. They usually know a lot about lenders who are having trouble. While you're there, ask if they have a list of lenders they like to work with. This can help you choose between fewer options. Ask questions. Does the lender offer ways to pay online? Do they pay both Federal and private loans at the same time? Is customer service by phone available 24 hours a day, toll-free, and by phone? Before you choose a lender, you should think about these things.
Also, you should know that once your loan is paid off, the lender can sell it to a third party. Your loan will then be serviced by these third parties, so you won't have to deal with the bank or group that gave you the loan. This could be both good and bad. If you'd rather work with the same people for the whole time you're paying back your loan, look for lenders who offer "life of the loan servicing."
Comparing student loans is a lot like comparing credit cards or cars. It all depends on the terms and the service. You don't want to end up owing a lot more than you thought you would or having to deal with rude loan servicers. Look for lenders who are known for being easy to talk to, taking care of their borrowers, and making it as easy as possible to pay back their loans.
