Step 3: Shop Around

Students are shopping for student loans like they search for flights on Orbitz.

1. To avoid remaining in the dark about the finer points of your student loans, you'll want to gather as much information before applying as possible.
2. Your school's financial aid office is still the right place to ask for advice at the start of your research.
3. Then you should also do your own research to scout out the best rates available.
4. Read through the Project on Student Debt's tips to comparison shopping for loans.
5. Then use these online resources to compare specific, current lender offers:
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o FinAid's Private Student Loan Comparison Chart
o Simple Tuition: Compare Student Loans
6. In general, you are looking for a rate that is as close to the prime rate or LIBOR benchmark as possible. (LIBOR stands for London Interbank Offered Rate, and is a daily reference rate based on interest charged by banks on the wholesale money market.)
7. Also research non-profit lending agencies in your state and the state you plan to attend school in to find any deals. Some states will offer lower rates to try to keep students in-state for college.
8. Be sure to compare any discount offers on federal loans carefully.
9. Use FinAid.org's loan calculators to determine what your monthly payments will be for the types of loans you've chosen at the rates available.

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What to Ask

* Many students state in retrospect that they really weren't sure what they were getting into when they signed on the dotted line. Be sure you determine exactly what the terms of your loan will be before committing to a lender.

1. The Project on Student Debt provides a list of questions that you should ask private lenders:
1. What is the lowest interest rate and fee combination I can get? Will that rate last the duration of the loan?
2. If the interest rate is variable, is there an upper limit?
3. When will I be required to start making payments?
4. What happens to my loans if I go to graduate school after college?
5. What are the penalties for late payments?
6. What are my options for deferring or reducing my payments if I am suffering an economic hardship?
7. See the entire list for more questions to ask of potential lenders.
2. Just like when shopping for a credit card, if you discover a low rate on a private loan, try to find another lender willing to beat that rate. Just be sure to get the deal in writing.
3. With federal or private loans, be sure to ask what your repayment options are, if your loans qualify for loan forgiveness, what the grace period will be before repayment begins and what your options are if you can't pay. (Can you defer loan payments? What about forbearance?)
4. Be sure to take into the account that even if private banks are offering lower rates, only federal loans have fixed rates, which may protect you from soaring interest rates over time.
5. The Project on Student Debt warns:

"Beware of private loans in disguise: some schools put their own name on private loans, or the loans may have other brand names that make them look safer than they really are. Lenders often offer both federal and private loans, so make sure you know what you're getting before you sign on the line."