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Picking the Perfect Loan

After all of your college applications have been submitted and reviewed, you will receive financial aid award letters from the schools to which you have been accepted. Each school will offer different types of financial aid, and you will have to decide which college is offering the aid package that is right for you.

Check the Interest Rates

Here’s where federal student loans trump private loans almost every time. Unlike private loans, loans from the government have fixed interest rates—6.8 percent for Stafford Loans, 5 percent for Perkins Loans, and 8.5 percent for PLUS loans—that are significantly lower than those from outside lenders where rates can run as high as 20 percent. All undergrad students may borrow up to $27,000 under the federal Stafford Loan program; however, students must financially qualify for additional government funds. If you need more than $23,000 to finance your education, try scoring Perkins or PLUS loans before turning to private lenders.

Compare student loans to find the best match for you

Think picking the perfect college was hard? Try picking the perfect loan. Like schools themselves, student loans vary tremendously in terms of size, quality, and student requirements. Here’s a brief breakdown of how to compare student loan packages:

Check the Hidden Fees

In addition to the principal amount and interest, you’ll also have to pay origination, disbursement, default, and administrative fees. These vary from lender to lender; however, students almost always receive the best deal when they opt for federal over private loans. While Stafford Loan and PLUS fees are set at 4 percent, Perkins Loans have no fees at all. On the flip side, private loan fees can range anywhere from 0 to 15 percent, costing students thousands over a 10 to 20 year loan period. Before signing on to a loan, ask your lender to calculate the total amount you’ll have to pay back, including interest and fees.

Once you've distilled the distinct financial differences, the final decision comes down to which school offers the best opportunity for you to succeed in your college career. Compare carefully, and remember-the decision you make today will determine much of your financial future.

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