Smart Borrowing Basics

Before taking out any student loan, federal or private, you need to understand loans, their benefits, and your responsibilities.

The concept of a loan is pretty straightforward: first you borrow money, and then you repay it. 

Student loans should only be considered after you have exhausted all sources of "free money" - grants, scholarships and other awards. If after exhausting all other aid sources you find you still have a college funding gap, you may need to take out a loan.

A student loan is a big commitment that should be considered carefully.  You need to understand what a loan is, its benefits and your responsibility. This section provides the details and resources you need to make smart borrowing decisions.

When comparing loans, compare based on their total cost: principal plus interest and fees.

Borrowing or cosigning a private student loan is a serious financial commitment.  Private loans have higher interest rates and most charge fees, making them more expensive than Federal loan options.  Be sure to exhaust all Federal loan eligibility before borrowing or cosigning an alternative loan.

If a private loan is needed, student borrowers may secure better terms and pricing by adding a credit worthy cosigner to their application.  Always check the interest rate, fees, interest capitalization policy, repayment period, prepayment penalties and other terms and conditions of the loan before you sign or cosign a promissory note. 

Learn more about interest rates, fees and interest capitalization.