How to Choose a Student Loan Lender

If you choose to use student loans to finance your college education, they will be a fundamental part of your financial life for years to come.  That's why it's important that you choose a student loan lender you can work with for the duration of your loan.  As you evaluate your student loan choices, there are some key factors to keep in mind.

Approval Method

Most private student loan lenders consider income and credit history to approve you for a student loan.  If you have a poor credit history or low income, or both, you will likely be required to have a co-signer.  Without a co-signer, you will have to seek other loan options.

Federal student loans can be obtained without credit or income contingencies.  You must fill out a FAFSA, Free Application for Federal Student Aid.  You can get a copy of the application from the financial aid office at your school or fill it out online at www.fafsa.ed.gov.

Loan Terms

The terms and conditions of the loan will be one of the primary factors you use to choose a student loan lender.  Loan terms include things like amount of the loan, interest rate, whether the interest rate can increase and when, grace period, under what conditions you can default, etc.  Different lenders offer different terms with the loans they offer. 

You should choose the lender with the loan terms that will allow you to have the lowest cost over the life of your loan.  If possible look for lenders that offer a fixed interest rate.  This way, you don't have to worry about your interest charge fluctuating from one month to the next.

Repayment Plans

The hardest thing about a student loan is repaying it.  No matter what you expect your income to be after you graduate, you'll never know until you reach that point.  It's best to choose a student loan lender that has a variety of repayment options. 

Forbearance and Deferment Options

You may incur financial difficulty at some point in the life of your student loan.  Forbearance and deferment options give you the ability to temporarily postpone your student loan payments.  It's good to know that you'll have one less bill to worry about until you get back on track.  Without any forbearance or deferment options you'll be forced to continue making student loan payments if you have financial hardship.  Find out each lender's options for forbearance and deferment as well as the criteria for qualification.

As you consider student loan lenders, think about each of these factors.  Decide which factors are most important to you and look for a lender that offers the best terms in that category.