Dear Mr. Suffrin: I'll need a loan to pay for my college education and I don't know how to choose a good one. Help!
I'll need $17,000 a year for four years to pay for the basics like books and tuition and my dorm and a meal plan, and I'll be working part time to pay additional expenses.
So far, I've heard from 16 banks and lending institutions who want me to sign for a loan and they all seem to have pros and cons.
How can I know which deals are good and which deals are bad.
Any advice you can give me will be appreciated. - Looking for Cash in Paradis.
Dear Looking: Consult with your high school counselor or your university's financial aid office. Schedule an appointment with someone in one of those departments, and he/she should help you find the money you need. Be sure to file a free Application for Federal Student Aid (FAFSA). This will enable you to receive any federal loans or grants which you may be eligible for.
Look for free money:
•Scholarships and fellowships.
•Federal Pell Grant. Awarded to students with family incomes below $50,000.
•Federal Supplement Educational Opportunity Grant. Available to students with exceptional financial need.
•Academic Competitiveness Grant. Available to all first-year college students.
If you have to borrow money:
•Perkins loan. Interest rate is fixed at 5%.
•Stafford loan. Interest rate is fixed at 6.8% if disbursed after 7/01/06.
•Federal Parent Loan for Undergraduate Students (PLUS). Allows a student's parents to borrow at a fixed rate of 8.5%.
If you must borrow money from bank:
Compare the fees charged by the lenders. A loan with a relatively low interest rate but high fees can ultimately cost more than a loan with a somewhat higher interest rate and no fees. A good rule of thumb is that 3% in fees is about the same as a 1% higher interest rate.
Generally, the best private student loans will have interest rates of London Interbank Offered Rate (LIBOR) + 2.8% or Prime + 0% with no fees.
Read the detail to see if the lender charges a different interest rate for the in-school and grace period compared to a higher rate when the loan enters repayment.
Determine if automatic bank drafts can be used for faster payment.
To compare different loan programs, see FinAid's Loan Analyzer Calculator at: http://www.finaid.org/calculators/loananalyzer.phtml
Students' questions about finances answered - only in the St. Charles Herald-Guide. Financial expert and school board member-elect Al Suffrin, a certified public accountant, takes on the tough questions from parish kids- and their parents - in an important weekly column everyone should read. Send YOUR questions to: firstname.lastname@example.org or write: MONEYTALK, P.O. Box 1199, Boutte, LA