Your student loans guide: How to pick the right student loan for you

Compare student loan fees

It’s not unusual for student loan lenders to charge fees such as origination fees, late payment fees, or returned payment fees. No matter what the fee is, it can add additional costs to your loan.

Federal student loans have origination fees that cover the administrative costs of processing loans. These fees are subtracted from the loan amount so you receive less than you borrow. Yet, you’ll be expected to pay back the full loan amount plus interest.

For private student loans, fees vary by lender, and some don’t charge any fees at all. Common fees include late and returned payment fees.

When evaluating your student loan options, look for fees and understand how they are applied and how they affect your costs to borrow.

Understand interest rates

Understanding interest rates is important because all student loans charge interest. Interest is the amount of money lenders charge you to borrow from them. It’s a percentage of the loan amount and it varies among lenders.

Federal student loans have fixed interest rates. The rate for each federal student loan type is set on July 1 and is the same for every borrower. Private student loans on the other hand offer borrowers the option of choosing between a fixed or variable interest rate, and the rate varies for every borrower based on their credit history.

Look at monthly payment options

Many lenders offer a variety of repayment options that range from deferring payments while in school to making in-school payments of interest, a small fixed amount such as $25, or the full principal and interest. Making even small payments during school even if you aren’t required to can help you save money on the cost of your loan.

Lenders also offer repayment plans that range from as few as 5 years up to 25, depending on the loan. Keep in mind that the longer it takes you to repay your loan, the more you will pay in interest. You should choose a repayment plan where you can easily manage your monthly payments so you don’t risk falling behind on payments.

Federal student loans offer various repayment plans that range from 10 to 25 years, and include more flexible options than private student loans, such as income-based plans. These options reduce the amount of your monthly payment but extend the repayment period, so be sure to evaluate what this does to your total loan cost when making a decision.

Repayment plans for private student loans vary by lender and tend to range from 5 to 20 years. They have less flexibility than federal loans and do not offer income-based plans. Both federal and private loans provide temporary assistance if you are experiencing financial hardship.

Familiarize yourself with the different types of repayment plans available so you understand how they work and what type of plan best fits your needs.

Explore borrower benefits

Check to see if the lenders you are considering offer any student loan benefits such as rewards or incentives you can earn to help you reduce your interest rate or loan cost. Some lenders offer an interest rate reduction for being enrolled in automatic payments or for making on-time payments, and some may offer a cash reward for getting good grades. When evaluating federal and private student loans to determine which are best for you, do the math to figure out which one will cost the least, and remember to take into account discounts, rates, fees, and repayment plan options.