Worried about paying for your next semester? Then you’re probably at least considering a student loan. The reality is that millions of students find themselves needing to borrow money to pay for the cost of higher education.
If you take the right steps now, however, you can save yourself a big headache later. Experts estimate that about 8 million Americans are paying more than they have to on their current loan. Follow the tips outlined here and avoid getting stuck with a high interest loan. The best part is that it’s a lot easier than you think.
TIP 1: Check Federal Loan Sources First
The federal government is the best place to get low interest student loans, but there are some limitations. For instance, you may need to demonstrate financial need to qualify for some federally funded loans. Plus, you usually have to work with your school’s financial aid office when applying for a federal student loan.
For dependent undergraduate students, the borrowing limit for the most affordable federal loans is $31,000. Depending on where you go to school, that amount might not cover all your expenses. Still, federal loans offer interest rates as low as 4.45%, so you want to max out on these loans first.
Be careful about PLUS loans that are also offered by the federal government. These loans carry much higher interest rates and are comparable to private lenders that might offer you a better deal.
TIP 2: Be Ready to Shop Around
If you find you need to borrow beyond federal sources of aid, be prepared to shop around for the best lender. There are several reasons for this:
- To compare interest rates and terms.
- You might not get approved by all lenders.
- Some lenders may require a co-signer.
- To choose the best benefits and deferment periods.
Even though the interest rate is the most important factor, the loan you choose may depend on other features. This is especially true if two lenders offer you the same rate.
TIP 3: Go With a Multi-Lender Marketplace
The thought of shopping around for a student loan makes most people cringe for good reason. In the past it meant going door-to-door and filling out many forms. Plus, getting rejected by more than one lender was fairly common.
Today, the web based multi-lender marketplace takes the pain out of the process. Now, you simply answer one set of questions about yourself and get prequalified rates personalized to your situation. The entire process takes only a few minutes. You get all the information at your fingertips so you can make an informed decision easily.
Even if you get turned down by some lenders, there’s a good chance a different lender will accept you. Online platforms streamline the entire process making it much easier and efficient.
- Max out low interest federal student loan sources.
- Remember, federal PLUS loans are not low interest.
- Compare lenders to get the loan that fits your situation.
- Take advantage of web based multi-lender marketplaces.
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