Strategic Borrowing
Learn Which Loans to Try For First
It's easy to rush through the loan process. But if you take a minute and consider the following points, you could save yourself some money.
Exhaust Subsidized Options First
Try first for the least expensive loan. That's generally the loan with the lowest interest rate. The lower the interest rate, the lower the total cost.
Starting with the least expensive, your loan batting order should be:
- Federal Perkins Loans
- Federal subsidized Stafford Loans
- Federal unsubsidized Stafford Loans
- Federal parent PLUS Loans
- Private (alternative) loans
To learn more about each type of loan, read College Loan Options.
Which of the loans you're considering will cost you the least in the long run? Use the Student Loan Comparison Calculator to compare specific loan offers. The calculator uses interest rates and other details to determine the total cost of each loan.
Find out if you have access to a special loan source (like the Air Force Aid Society); sometimes the terms of those loans are as favorable as those of the Perkins or subsidized
Know Your Limits
Avoid the loan trap: Because need-based loans are easy to apply for and don't require payments while you're in school, it can be tempting to borrow the maximum amount—even if it's more than you actually need and more than you can afford to repay.
So remember, you don't have to borrow the entire amount shown in your award letter. Use the Student Loan Calculator or Parent Debt Calculator to figure out how much loan your family can afford.
Explore Ways to Reduce Your Loans
Can you lower your expenses? Is working more during your school years an option? Are there scholarships for you? If you reduce spending or bring in more money, the amount you have to borrow goes down. Find tips in How to Spend Less and Bring in More.
