Find a Good Student Loan

If you or your child is applying for college, you are probably considering how you’ll pay for the expenses involved.  Higher education has unfortunately become very expensive, almost quadrupling in price over the past twenty years.

Nearly two-thirds of undergraduates take out loans to attend college or university.  There are two main types of student loans:  those which are backed by the federal government, and those which are not.  Loans which aren’t backed by the government are often referred to as “private” loans.

AFFIL and other consumer groups recommend you exhaust your federal, state and institutional loan options before turning to private loans, which are expensive and risky.

Applying for a federal loan

Federal loans are disbursed mainly through the Direct and the Federal Family Education Loan (FFEL) programs.  Most schools participate in one of these two programs.  Once you know which should you or your child will be attending, you should find out which one your school participates in.

If your school participates in Direct lending, the government itself will be your lender and you won’t need to shop around.

If your school participates in the FFEL program, you’ll need to choose a private lender.  Your loans are regulated and guaranteed by the government, so this is still considered a federal loan. 

Your school’s financial aid office can give you some ideas for choosing a lender, but keep in mind that you are not required to use a lender your school recommends.  Interest rates for FFEL loans are capped by the government, and other terms are regulated as well, so the lenders will likely offer very similar options.  In general, look for a loan with a low interest rate and flexible repayment options.

Each year on July 1, the government announces any changes to interest rates and other terms for federal loans (both Direct and FFEL).  To find out this year’s terms, visit the Project on Student Debt.

Shopping for a private loan

If you have exhausted all the grant and loan options your school provides, as well as all federal and state aid, you may need to apply for a private student loan to cover your educational expenses.  Visit the Project on Student Debt for questions to ask when shopping for a private loan.

For more information, visit the Department of Education and Student Loan Borrower Assistance.

AFFIL is grateful to the National Consumer Law Center and Student Loan Borrower Assistance for their help with this page.
Last update:  January 2009.