What to look for in private student loans

What to look for in private student loans

But many families find they still need to borrow to fill in the gap. About 42% of them borrowed some money to pay for school last year, according to a survey published by lender Sallie Mae.

“There’s still time to take out a loan, but you want to do it sooner rather than later,” said Kalman Chany, the author of Paying for College Without Going Broke, an annually updated book from The Princeton Review.

If you’ve suddenly realized the bill is bigger than expected, there are three borrowing options: federal loans that students borrow, federal loans that parents borrow, and loans from a private lender.

Use federal loans for students first

taking out personal loans

The federal Direct Loans for students come with low interest rates, flexible repayment options, and students are automatically eligible regardless of income or credit history.

For some low-income students, there’s another benefit. Their Direct Loans won’t start accruing interest until six months after graduation. For everyone else, the interest starts accruing immediately.

But there’s a limit on how much students can borrow. Direct Loans are capped at $5,500 during your first year of college, $6,550 during your second year, and $7,500 during your remaining years. (These loans also have a 1.1% origination fee. So you’ll receive closer to $5,440 during your first year.)

To apply for the loan, first fill out the Free Application for Federal Student Aid (FAFSA), if you haven’t already. Then log in to to accept the loan.

Federal Parent PLUS Loans

For some, the capped federal loans for students may not be enough to cover the remaining cost of college. Parents may have to step in to borrow the money themselves from the federal program or a private lender.

The federal PLUS Loan program for parents should offer enough money to cover the remaining cost of attendance (including things like books and transportation) after using other financial aid. …