How to Compare Loan Offers

You’ve received your financial aid award letter.  There are several different loan options available to you.  How do you know which loan package is right for you?  What do all of the terms mean?  Is one loan better for you than another?  Getting your loan package in the mail is just the beginning.  Take some time to evaluate the different loans to see which one will meet your needs. Keep reading to learn how to compare loan offers so that you can make an informed decision as to which loan is right for you.

Four Key Variables

As you begin to compare loans, there are four key variables to consider: interest rate, subsidized versus unsubsidized, fees and repayment terms.  Keep reading to see how each variable comes into play with your loans.

  • Interest rate.  You want the interest rate to be as low as possible.  The lower the interest rate means you’ll pay back less over the life of your loan.  Lower interest rates save you money.
  • Subsidized versus unsubsidized.  Subsidized loans are based on financial need and the federal government will pay the interest for you while you’re in school.  By doing so, the government makes this type of loan less expensive for you.  If you are eligible, always consider a subsidized loan first.
  • Fees.  Most loans will have originating and processing fees. Just because you borrow $5,550 doesn’t mean that’s the amount you’ll receive.  Your check amount will have fees deducted from it.  Try to get a loan that has the fewest amounts of fees.
  • Repayment terms. Some offer a full range of repayment plans as well as incentives, such as interest rate reductions for on-time payments. Before borrowing a loan, make sure you understand the repayment requirements and options.

These are the most important variables to take into account as you compare your student loan options.  It would be a good idea to make a checklist and use the variables to see which option is right for you and your financial needs.

Find the Least Expensive Loan

Even though you’re borrowing money, you want to save as much money as possible.  To do so, you need to look for the least expensive loan as you compare loan options.  The least expensive loan is usually the one with the lowest interest rate.  Generally speaking, the least expensive loans in order are:

  • Perkins
  • Subsidized Stafford
  • Unsubsidized Stafford
  • Private

Use this list to compare which loan will be the least expensive for you in the long run.  It’s a good idea to exhaust the least expensive loan options, like Perkins, first before considering more expensive options, like private student loans.

Securing Student Loans

The first thing you need to do to get a student loan is to complete the FAFSA, Free Application for Federal Student Aid.  The form is easy to complete and can be done online.  If you demonstrate financial need, the government will give you the least expensive loan possible.  You’ll receive a report that will outline what other financial assistance you may qualify for, too.  Use the guidelines discussed above to compare the loans and make an informed decision about your financial future.