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.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The following sections describe your options among federal and private loans.
Student Loans 101
-
What About Those ‘Guaranteed’ Life Insurance Ads?Guaranteed life insurance policies can sound tempting if you've been declined for insurance elsewhere. Here are four downsides and one alternative.
-
13 Answers to Pressing Social Security QuestionsFrom smart claiming strategies for couples to tips on maximizing your monthly check, we have advice that can help you.
-
Blue Collar Workers Add AI to Their ToolboxesThe Kiplinger Letter AI can’t fix a leak or install lighting, but more and more tradespeople are adopting artificial intelligence for back-office work and other tasks.
-
AI Goes To SchoolThe Kiplinger Letter Artificial intelligence is rapidly heading to K-12 classrooms nationwide. Expect tech companies to cash in on the fast-emerging trend.
-
What To Know if You’re in the Market for a New Car This YearThe Kiplinger Letter Buying a new car will get a little easier, but don’t expect many deals.
-
How Intrafamily Loans Can Bridge the Education Funding GapTo avoid triggering federal gift taxes, a family member can lend a student money for education at IRS-set interest rates. Here's what to keep in mind.
-
How an Irrevocable Trust Could Pay for EducationAn education trust can be set up for one person or multiple people, and the trust maker decides how the money should be used and at what age.
-
Will Lower Mortgage Rates Bring Relief to the Housing Market?The Kiplinger Letter As mortgage rates slowly come down here's what to expect in the housing market over the next year or so.
-
UTMA: A Flexible Alternative for Education Expenses and MoreThis custodial account can be used to pay for anything once the beneficiary is considered an adult in their state. There are some considerations, though.
-
Coverdell Education Savings Accounts: A Deep DiveWhile there are some limitations on income and contributions, as well as other restrictions, a Coverdell can be a bit more flexible than a 529 plan.
