If your financial-aid package includes a loan from the school itself, you'll probably receive that money automatically -- or will simply see the amount of the loan deducted from your tuition bill. But for most other loans, you'll need to find a lender (except for certain federal loans where Uncle Sam is the lender), complete an application and wait for approval.

In most cases, choosing a loan is fairly cut-and-dried. You could choose to decline a federal loan offered in a financial-aid package in favor of, say, a private loan, but in most cases you wouldn't want to. Subsidized Stafford loans are a very good deal for students, since Uncle Sam pays the interest while your child is in school. And it's tough to do any better than a Perkins loan (a federally funded loan that's administered by schools and has a 5% interest rate). Even unsubsidized Stafford loans are a pretty good deal, given the flexible repayment terms and low rate. (The Stafford interest rate is variable and can change annually, but it is capped at 8.25%.)

For private loans, you'll want to select the lowest-cost alternative, based on the loan's interest rate, fees and repayment terms.

The following sections describe your options among federal and private loans.

Student Loans 101

Stafford Student Loans

MORE: Kiplinger.com | The Basics of Money | Getting Started

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