Guidance for College Loan Borrowing

As college students look ahead to the first day of classes, families everywhere are preparing to pay the college bill. Fall semester charges are usually due in early August, and if you plan to borrow a college loan to help cover your expenses, you'll want to submit your loan application at least two weeks before your billing deadline. To help you navigate the college loan financing process, we've outlined some guidance below.

Shop Around

Before borrowing, you'll want to gather data from a wide swath of lenders in order to make the final decision on which loan you'll borrow. Where should you start? Third-party loan comparison sites like Credible and ELMSelect can provide you information on several options in one place. You can also check with the college's financial aid office, as many provide a list of lenders the college recommends.

Look at the Details

What should you look for once you have information from a handful of lenders? You'll want to compare the available interest rates, repayment terms, and fees. Keep in mind that many lenders advertise their lowest possible interest rate, which most borrowers don't get, so pay attention instead to the full range of rates, including the highest interest rate available.

Understand Approval Criteria

Besides the Federal Direct Subsidized and Unsubsidized Loans offered to students who submit the FAFSA, student loan approval is based on the credit of co-borrowers on the loan. Know that lenders will review co-borrower credit history to determine the approval of a loan application and the interest rate they offer. Every lender has different credit criteria.

Character Counts

Do your research to find out about each lender you're interested in. Do they offer other resources to help you, the borrower, such as calculators, videos, and support articles? Can you call them to ask questions and receive guidance on making financing decisions? You'll want to work with a lender you trust.

A Word about PLUS

You may have heard about the PLUS Loan. The PLUS Loan is a federal loan to help parents pay for college, but it's different than the Federal Direct Subsidized and Unsubsidized Loans for students, which MEFA recommends that students borrow first. The PLUS Loan is just one loan option among many to pay the bill, and like other college loans requires an application and approval. It has one set interest rate for all parent borrowers (9.08% for the 2024-25 academic year) as well as a 4.288% origination fee that's deducted from the amount borrowed. Make sure to evaluate all of your loan options to make sure you understand the differences in loans available to you.

As always, MEFA is here to provide you guidance as you make a plan to pay your college bill. If you have questions or want to talk through your options, please contact us. We can be reached at (800) 449-MEFA (6332) and collegeplanning@mefa.org.