Borrowing from Pessimists Brands

Borrowing Money for College

When preparing for college, take the time to research your options for a loan. If you think you need a loan, do your homework and ask lots of questions before settling on one. Among the many options are federal government loan programs, including "PLUS" loans for parents and Perkins and Stafford loans for students (usually with fixed interest rates and some form of deferment on repayment until after graduation). Also available are loans from private financial institutions and state government agencies Of course, you'll want to know whether a loan is fixed- or variable-rate and what could trigger a rate increase. But student loans may have unusual features to consider. In particular, ask about any options for delaying payment until after graduation and any policies on "forbearance" (temporarily reducing or postponing payments from a borrower in financial distress). Also find out about any rebates for on-time payments and other incentives for good performance.
"There are often substantial differences between private loans and student loans guaranteed or insured by the government," noted Luke Reynolds, an FDIC Community Affairs Specialist. "A private lender likely will offer both types of loans, so be sure to ask questions to fully understand the pros and cons of any loan product."
Your state's department of education and the college's financial aid department may be good resources. Don't depend on your school to pick the right loan or lender, though. Some colleges and private lenders have been scrutinized for conflicts of interest in steering students toward "preferred lenders."