How to Select the Best Student Loan Lender
When you are beginning your search for funding for higher education, it may surprise you just how many lenders are vying to attract your business. This makes it more important to learn all that you can about student loans so you can pick the lender that offers you the most attractive terms.
In this post, learn how to select the best student loan lender for your needs and goals.
First, Fill Out the FAFSA Application
Even if you don’t think you will qualify, you should still fill out the FAFSA, or Free Application for Federal Student Aid, form. This is because most college financial aid departments use information from the FAFSA to award private need-based and merit-based scholarships, grants and work-study programs as well as student loans.
Also, it will give you a thorough education in your own finances, which will be necessary when shopping around for lenders. Plus, the FAFSA itself is used to award both merit-based and need-based education funds.
Know Your Loan Types
There are a number of different types of student loans. Federal loans and private loans are the two major types, but there are also some state loans and institutional loans available.
Federal loans are generally administered through the FAFSA form, while private loans come from banks and financial institutions. Other private loans may be offered by associations, ethnic or gender-based organizations, nonprofits and similar entities. By knowing all the different types of loans you can know all the places to look to find loan options.
Interest Rate Matters
If you are taking the loan out under your own name, it will be your credit score lenders will look at. If your parents are supporting you to take out the loan, they may have more credit history to be able to get better loan terms and interest rates.
Sometimes, this can even mean a private loan is a better deal interest rate-wise than federal loans. It pays to compare.
Know the Questions to Ask First
In addition to interest on the principal, you may be assessed administration fees, early repayment fees, late fees and more. You want to know every fee associated with the loan so you can compare and contrast options.
You always want to know whether the lender will participate in a student loan consolidation package after you graduate, and if you can repay the loan early without penalty. Finally, you want to know if you have a repayment grace period (typically six months, if offered) after graduation.
By knowing the different loan types, the interest rates and the questions to ask, you can ensure you get the very best deal on a student loan.