How to Choose a Private Student Loan
Use private student loans to pay your college costs only after you have exhausted your federal loans. Federal loans
are less expensive than private loans. The most common federal loan is a Stafford loan, and it has a fixed interest rate
of 6.8%. Nearly everyone is eligible. To apply for federal loans, go to http://www.fafsa.ed.gov.
Instructions: Answer the questions below for each loan you are considering. To determine the lowest cost loan, we
recommend that you minimize both the APR (Step 2) and the total amount repaid (Step 3), while marking sure you
can afford the monthly repayment (Steps 4 & 5). Federal law requires lenders to provide you with information that can
answer each question. Ask the lender for this information in writing if you have not received it.
Step 1: Loan Facts. Write each lender’s name.
How much am I borrowing? This amount is called the Principal.
Write the Principal.
What fees will the lender deduct when I get the loan? Write the
fees. If the fees are expressed as a percentage of the Principal,
multiply the percentage x the Principal.
What is the interest rate? Write the rate.
Step 2: Compare Annual Percentage Rates (APRs). The lower the APR, the less interest and fees you will pay.
What is the APR? The APR is the total cost of the loan including
the interest rate and any fees, expressed as an annual percentage
of the Principal. Write the APR.
Step 3: Compare the repayment periods. The longer it takes to pay off the loan, the more you will repay in total.
How long is the grace period? This period usually begins when you
sign up for loan and ends up to 6 months after you graduate. You
do not have to repay the loan during this period. Interest still accu-
mulates, however, and is added to the Principal. Write the number
of months in the grace period.