Student Loans


Student Loans:
Study Your Options!

Préstamos estudiantiles: ¡Estudia tus opciones! 
Click here for a printable version of this document 


5 Key Steps:  Choosing Schools and Loans

Shop carefully when you are preparing to go to college!   The choices you make now can affect you for a lifetime.  Students and families who take out student loans may find themselves in very serious debt trouble if they are not able to pay back the loans later on.  Unlike other kinds of debt, student loans usually cannot be wiped out in a bankruptcy proceeding. 

1. Compare colleges for better education deals.
  • Shop for colleges the way you would look for a house – look for value as well as affordability.  Tuition and fees are not the only factors that matter.  College Navigator tools at can help. Look for:
  • Colleges that can offer non-loan types of financial aid
  • Lower student loan default rates (known as cohort default rate)
  • Higher student graduation rates
  • Higher job placement rates for career-related schools
  • Affordability:  check college websites to get details about the “net price” of attending - the cost to you after scholarships and grants are awarded
  • Colleges that offer credits that will be accepted at other schools.  Many for-profit schools offer credits that will not be accepted by most public or private non-profit colleges. 

Be sure you are getting a high quality of education for your money:  seek a school with a good academic reputation.

2. Fill out the FAFSA form.  Go to
  The Free Application for Federal Student Aid, also known as FAFSA, is used by schools to determine how much financial aid will be available to students.  Filling out the FAFSA form is the first step when seeking college financial aid.
3. Talk to the financial aid counselor.
  Once you have been accepted to one or more colleges, talk to the financial aid counselor at the schools you are interested in attending.  It is very important to know what financial aid options might be available to you at each one.  Do not assume you will not be eligible for financial aid.  Ask about it.
  • Ask whether you qualify for grants or scholarships that do not have to be paid back.
  • Ask what the Expected Family Contribution (EFC) will be, meaning the projected cost to the student and the student’s family at that school.  For many families, this can be a very significant amount.
  • Get advice about types of loans that are available to you, if you will need a student loan.
  • If the counselor recommends a private student loan provider, ask for details about why that particular lender is being suggested
4. Start with government loans before seeking private student loan options.
  If you need a loan to help pay the Expected Family Contribution, federal and state loans are generally lower-cost options with more generous repayment terms.
  • Visit the National College Finance Center (NCFC) at, available in many languages, for details about many kinds of college financing options including federal and state loans as well as military and veteran educational benefits. 
  • Additional information is available from the federal government at in English and Spanish, and from The College Board at in English and in Spanish.
  • First, take advantage of any federal student loan possibilities.
  • If you still need further loans, check your state’s loan options.
  • You may decide to seek private loans if you need further college cost funding after receiving all possible grants, scholarships and government loans.  The NCFC offers a Private Student Loan Comparison Tool on its website at to help you choose a private student loan.
  • Military veterans are entitled to receive special educational financing benefits.  Information is available at in English.  
5. Check terms and repayment requirements, and be sure you can afford to repay the loan. 
  No matter what type of student loan you get, be sure you understand how all the terms of a loan can affect you and what will be required before you sign.  Ask:
  • When do I have to start repaying the loan?
  • When will I start owing interest on the loan?
  • What will my monthly loan repayment amount be?
  • What is the total cost of the loan – meaning, the amount I will have to repay over time, including interest and any fees?
  • If I have problems making payments at any time, what are my options to defer the loan (stop paying for a short period of time) or to make my loan payment amounts smaller?

Your loan will probably cost more to pay off if you request a deferment or lower payment options.  If you are allowed to stop repaying a student loan temporarily, you will be required to begin making payments again within a reasonable time period.  Ask when payments must begin again.  In very rare cases, with certain loan types, there may be loan cancellation options.  This is unusual and anyone receiving such a cancellation of debt might still owe a large amount in income taxes due on the “forgiven” debt amount.


Plan Ahead: Choosing a College

The U.S. Department of Education provides a College Navigator website to assist you in finding the right college:  Search options on this website include type of degree, location, major, tuition, size, accreditation, financial aid options, graduation rates, student loan default rates and other factors.  It also provides useful tools like college comparisons that can be exported into a spreadsheet.

Keep in mind that there are public and private colleges.  Private for-profit colleges are often career-focused.  It’s a good idea to check whether there are cheaper options through public or community colleges and to check a for-profit school’s record with the Better Business Bureau at  According to federal data, most graduates of community colleges leave school without any loan debt.  By contrast, graduates of two-year career programs at for-profit schools graduate with an average of $23,590 in loan debt.

If a career school has a low rate of placing students in jobs, or has high student loan default rate (also known as the cohort default rate), these are signs that you should proceed with caution.  This information is often posted on the school’s website.  A school’s student loan default rate should be under 30%.

Look for a school that has a high graduation rate.  You want assurance that most students who incur debt at that particular school are getting a full education, instead of dropping out early with a big student loan debt but no degree and not enough earning power to be able to repay the loans. 

Some colleges are simply better able to offer substantial financial aid packages to their students than others.  Check the College Navigator website for some information and talk with a financial aid counselor at any school you are seriously interested in attending, to understand what they are able to offer you.

Attending college fairs is a great way to learn about schools.   College representatives attend these fairs and can answer questions.  The National Association for College Admissions Counseling provides a schedule of college fairs on its website in English at

Before choosing a college, visit the campus, if at all possible. Most colleges offer tours of the campus led by current students who can answer questions about daily campus life and school culture. Some schools also offer virtual tours on their website.

If you are considering a distance learning course or online degree, be aware that not all programs are accredited or eligible for federal student aid. To find out whether you can receive federal student aid for your program, check with your school’s financial aid office.

It is important to know whether a school is accredited, whether the program you are interested in is programmatically accredited, what type of accreditation it has, and whether the school is eligible for certain types of financial aid that you may wish to use (such as military education benefits).

The type of the school’s accreditation makes a difference in whether you will be able to transfer credits earned at that school to another school.  Some schools are accredited by “national accreditors” and others by “regional accreditors.”  In general, public schools and private non-profit schools are “regionally accredited”, and for-profit career schools are “nationally accredited.”  Credits earned at nationally accredited schools are usually not transferable to regionally accredited schools.

Accreditation also matters for programs that lead to jobs which require licensing or certification.  If you are enrolling in a program that leads to such a job, make sure that the program you are considering meets the necessary standards so that graduates are eligible to sit for exams or otherwise qualify for the license or certification.  In some cases, a program must be programmatically accredited in order for graduates to be eligible to sit for licensing exams.

The U.S. Department of Education offers information about school accreditation in English at this website address:  You can find information about Veterans Administration-approved schools on their website, located at


Paying for College

It’s never too early to start planning for the cost of college, and there are many tools and information sources available to help families make an informed decision.  (See the Resources section at the end of this article.)

After you decide on a college, make an appointment with the financial aid office of that college.  Discuss estimated costs as well as applying for financial aid, grants and scholarships. The financial aid counselor can advise you on whether to borrow, how much to borrow, and provide information about possible lenders.

However, students and parents should always do their own loan research, too.  Knowing what funding options are available for education will help you make better financial decisions based on your needs. Federal student loans offer borrowers many benefits not typically found in private loans. These include lower fixed interest rates, income-based repayment plans, loan forgiveness for certain types of employment after graduation, and payment postponement options.  Always explore grants and scholarship possibilities, and exhaust all federal and state student loan options before considering a private loan.

Federal loan types include:

  • Perkins Loan – For undergraduate and graduate students.  Eligibility is based on need and fund availability at a specific college.  The loan is repaid to the school.
  • Direct Subsidized Loan – For undergraduates enrolled at least half-time, who show financial need.  Interest is not charged while the student is in school or during deferment periods.  The loan is repaid to the U.S. Department of Education.
  • Direct Unsubsidized Loan – For undergraduates and graduate students enrolled at least half-time, without a financial need requirement.  Interest accrues during all periods.  The loan is repaid to the U.S. Department of Education.
  • Direct PLUS Loan – For parents of undergraduates, graduate students and professional students who are enrolled at least half-time, without a financial need requirement.  The borrower may not have a negative credit history.  Interest accrues during all periods.  The loan is repaid to the U.S. Department of Education.

Check the prevailing interest rates, loan maximums, benefits and requirements for each loan type at the time you apply.

Your first step in applying for financial aid is to complete the Free Application for Federal Student Aid (FAFSA).  Filling out the FAFSA is also essential because schools use information from the application to award financial aid. Apply at


Scholarships are usually awarded based on academic, athletic or artistic merit; for relief of financial need; or for support of particular cultural groups.  The scholarship grant may be made by the school, or by another party, such as an employer.

The following websites are listed by The New York State Higher Education Services Corporation as resources that can assist you in applying for scholarships:

  • Fastweb - Matches members to relevant scholarship opportunities completely free of charge.
  • College Board Scholarship Search - Find scholarships, other financial aid and internships from more than 2,200 programs.
  • – No-cost service for seeking and applying for scholarships.  This is a business.  Be sure to read the site’s privacy policy.

Beware of Deceptive Tactics

Never pay for help to find money for college.  You can do whatever is needed on your own and with the help of financial aid counselors, without paying anyone.  These statements are a good indication that an offer is probably a scam:

  • “We have scholarship information nobody else can provide!”  Avoid services that claim to offer special access to grants and scholarships, or lower-interest loans, in exchange for payment.  Usually these are scams, and the buyer receives only a list of publicly available information – or nothing at all.
  • "You've won!" a contest or scholarship you never applied to get,  especially if they ask you for a credit card or bank account number to process your "winnings" and insist that you “Act now!”  You must apply for scholarships at a college first before you can be eligible to receive them.
  • "Millions of dollars go unclaimed." Legitimate scholarships are awarded to eligible applicants and are not unclaimed.
  • "It's guaranteed!" Scholarship search services can't guarantee you the scholarship money.
  • "We do the work for a fee."  It’s not possible for anyone to do all the application work for you.  You can do your own research for free, without getting ripped off by a scammer.


The following are types of federal grants available to eligible students.  Be sure you know your school’s deadlines for grant applications.  They may be different at different colleges.

  • Federal Pell Grants – Such grants are based on need, and are awarded to undergraduate students who have not yet earned a bachelor's degree or a professional degree.  Check the maximum grant award amount at the time you apply. 
  • Federal Supplemental Educational Opportunity Grant (FSEOG) - for undergraduate students with exceptional financial need.  Not all schools participate in this type of grant, and funding availability can vary by school.  Ask your financial aid counselor about it.
  • TEACH Grants – Such grants have special study requirements and are available only to students who are preparing for a career in teaching.  The grant may turn into a loan if the recipient does complete the requirements under the grant agreement.

Work Study

You can earn money to offset some of your education costs through a work-study program, if one is available at your school and you are eligible to receive this type of award.   This can help reduce the amount you need to borrow.  Check the college website and ask the financial aid office whether this opportunity is offered and available to you.


Choosing a Loan: Ask Questions

Before you commit to a loan, make an appointment with a financial aid advisor and be sure to ask the financial aid office or lender important questions before making a financial decision. 

If you will need to borrow, make sure you understand all the benefits and requirements that come with every loan.

  • What types of non-loan grants or scholarships are available for you? 
  • Does the college offer a tuition installment plan or work-study opportunities?  It will reduce your student loan debt if you can pay off part of the cost while you are still in school.
  • What borrower benefits and rate discounts are offered with the loan (such as reduced interest under some circumstances or automatic bank deductions)?   Which of those benefits depend on making a timely payments?
  • Is my loan likely to be sold? If so, will all of my loan benefits continue?
  • How many borrowers actually receive the lender’s advertised lowest interest rate?
  • What is the interest rate for me as a borrower, and will it remain the same throughout the duration of the loan?
  • When do loan payments begin?
  • When does interest on the loan start accruing?  While I am in school, or only after graduation?
  • What will my monthly loan payments be?
  • How long is the loan term?
  • What is the total amount that I will have to pay over the life of the loan?
  • Is there a penalty for paying off the loan before the end of the loan period?
  • What is the school’s loan default rate? 
  • What are the penalties for missing a payment?
  • If I have trouble paying the loan back on time, what are the possibilities for loan deferment or forbearance?   And what would that cost me?  When are these options available to me – while I am in school, after graduation, or under other circumstances
  • If my loan has a co-signer, are there any circumstances that could change the terms of my loan, result in the full amount being due or automatically place my loan in default (such as the death of the co-signer)?
  • How does the financial aid office select preferred private lenders?

If you are offered a private loan, ask what the basis for the recommendation is. Sometimes a college may recommend a lender that provides good customer service, but that does not necessarily mean that lender is offering the lowest interest rate.


Choosing a Loan: Tips

Check Loan Costs Versus Potential Earnings

  • It is recommended that you do not borrow more than half of your expected starting salary rate of the profession that you choose.  Check out skills needed for potential careers and earning potential with the U.S. Department of Labor’s search tool at /

 Do Advertised Rates Apply to You?

  • Your lender should fully disclose the actual interest rate and fees you will pay, in advance.  If this is not provided, do not sign until you have received and understand a written explanation of all terms and conditions that will apply to you.  Ask for an explanation if anything is not clear.
  • In many cases, the rates on advertisements are not the rates on the actual loan documents you may sign.  Keep copies of offers received from your lender or school and compare to the terms in your actual loan papers.
  • Advertised rates may only be offered to people with high credit scores, so be aware that you will not know the interest rate of a private loan until you apply because it will be based on your credit score, or the credit score of your loan co-signer.
  • To compare private loan interest rates, it may be necessary to apply for several loans.  If you apply for multiple loans within a short period of time, it probably will not affect your credit score adversely.

Watch Out!

  • Be wary if lender materials create the impression that they are connected to the federal government or if the lender offers free gifts or a sweepstakes.  
  • It is considered unethical for a lender to offer gift cards or other inducements to borrowers, schools or others in exchange for testimonials or loan applications. In some cases, this type of offer might be illegal under the Higher Education Act of 1965.
  • Don’t give out personal information over the phone to unfamiliar parties.
  • Scam websites may claim to offer scholarship information; be careful and submit personal financial information only when you have checked out the website and you are confident that it is legitimate.
  • Check to see how long the lender has been in business.  Be cautious if the lender does not appear to be well-established.
  • If someone recommends a private loan before you have taken advantage of all grants and government loans – or pushes you to make a fast decision - they could be steering you toward an inappropriate loan.  Ask questions, and before doing business, check other options and compare terms.
  • Check with the Better Business Bureau (, your state Attorney General (, or your local consumer protection agency ( to see whether other consumers have complained about the private loan company you are considering.


Student Loan Debt Issues

Student loan debt is now the second highest form of consumer debt after mortgages.  According to the Consumer Financial Protection Bureau, student loan debt has increased dramatically and is now about $1.2 trillion and growing.  Average college debt at graduation is about $26,000. Consumers who graduate from school carrying large amounts of student loan debt may have to wait a long time before they can afford to buy a car or home, and may not even have much income to spend on things such as clothing or entertainment.  

If you default on your student loan, you can damage your credit for many years.  Your wages or tax returns may be garnished by the federal government or your lender – meaning a portion of a payment due to you can be withheld and paid to your lender instead.  Also, your lender may file a lawsuit to recover the entire student loan debt. 

Having tarnished credit can affect your ability to find a job or rent an apartment as some employers and landlords look at your credit score.  It can make it nearly impossible to get financing for major investments such as a house or car. 

Your loan’s co-signer may also face serious consequences if you default on your student loan, including garnishment of wages and long-term negative impact on the co-signer’s credit.  If a home has been used as security for the student loan, and the loan is not repaid, that home might also be lost.

Don’t imagine that you can escape your student loan debt if you declare bankruptcy.  Most borrowers are not eligible to have their student loans cancelled through a bankruptcy proceeding.  And even if that does happen, the borrower may still owe a large sum of money in taxes on the “forgiven” loan amount, which can be treated as income by the IRS.


Act Quickly If You Have Repayment Problems

As soon as you realize you are having trouble making loan payments on time, contact your loan servicer at once.  Do not ignore payment notices or wait to deal with the issue.  Never ignore legal notices about past due loans.  The problem will only get much worse if you do not cope with it right away. 

Virtually all lenders will want to help you make a plan to repay your student loans in a way that will be possible for you.  Don’t be afraid to contact your lender to strike a deal if you need help.

Talk to your lender about ways to make it easier for you to repay your student loan.  Options may include making lower payments or suspending loan repayments for a while under “deferment” or “forbearance” plans.   The type of student loan you have received and the lender type (government or private) will have an important impact on the kinds of options that may be available to you. 

Be aware that loan delays or other changes to loan terms will probably result in your paying a higher total loan cost over a longer period of time.

For additional information about coping with student loan repayment problems, visit, a helpful website resource in Spanish and English provided by the National Consumer Law Center.


Debt Repayment and Forgiveness

Check the National Student Loan Database System at in English and in Spanish to verify who your loan servicer is and how much you owe in Federal loans.  To check the status of private loans, you can contact your school’s financial aid office, as they may have it on file.  You can also request a copy of your credit report. You are allowed one free copy per year at

Once you have this information, you can decide what option below is appropriate for you and your repayment goals.

  • Pick the Right Repayment Option: Under the Standard Repayment Plan, fixed payments are made for up to 10 years.  If the Standard Repayment Plan is going to be hard for you to cover, extending your repayment period beyond 10 years up to 25 years can lower your monthly payments, but you'll end up paying more interest over the life of the loan.
  • Repayment Plans Tied to Income:  Income-Based Repayment and Pay As You Earn plans cap your monthly payments at a reasonable percentage of your discretionary income each year, and forgive any debt remaining after no more than 25 years, for eligible borrowers if certain requirements are met. Ask whether the forgiven debt amount might be subject to income taxes.  For private loans, call your service provider to see what options are available. See additional details below on options available under a new law in 2014.
  • Public Service Loan Forgiveness: The PSLF Program is intended to encourage individuals to work full-time, on a long-term basis, in government, 501(c)(3) nonprofit, and other public service jobs. Under this program, borrowers may qualify for forgiveness of the remaining balance of their Direct Loans after they have made 120 qualifying payments on those loans while employed full-time by certain public service employers. See details:
  • Payments Above the Minimum Requirement: The Consumer Financial Protection Bureau warns that the extra payments you send to your student loan servicer may not get applied in the way you intend. Make sure to send a letter with your extra payment with instructions. For most borrowers, applying extra money to the loan with the highest interest rate is the best option. Before sending any such payment, be sure to ask whether there are any prepayment penalties.  See the sample letter in English at this link:
  • Automatic Debit Payments: In some cases, you can lower your interest rate by signing up for automatic payments from your checking account.
  • Education Tax Credits: Deducting your student loan interest can lower your tax burden. The American opportunity tax credit, which is an expansion of the existing Hope scholarship credit, can be claimed in tax-years 2009 through 2017 for expenses paid for tuition, certain fees and course materials for higher education. Tax payers will receive a tax credit based on 100% of the first $2,000, plus 25% of the next $2,000, paid during the taxable year for tuition, fees and course materials.  In addition, 40% of the credit is refundable, even if you do not owe any tax.  See details: 
  • Military Student Loan Forgiveness (RSLF): Under certain circumstances, individuals who have served in one of the armed forces may qualify for student loan forgiveness.  To see information about military student loan benefits, visit this link in English:

Loan Consolidation & Repayment Tips

  • If you cannot find a job after graduation, unemployment deferment or forbearance will provide a temporary break from payments while employment is being pursued. Be aware that interest will probably accrue during that time.  Ask for details about all of the financial effects of making this choice and consider both advantages and disadvantages.
  • Loan consolidation, combining several loans into one package, enables you to make one payment each month but may increase the amount of interest to be paid over the life of the loan. Make sure to check not only that your payments will be lower, but also that your annual percentage rate (APR) will be lower as well. 
  • Be cautious when consolidating federal loans and private loans into one private loan, as you may lose the benefits and protections provided in federal loan programs.
  • If you have a Perkins loan, consolidation may not be in your best interest because you may lose your grace period and deferment and cancellation rights. 
  • Avoid lenders with high-pressure sales tactics. Check the terms of your loan making any quick decisions. The Department of Education publishes new variable rates before for some federal loans July 1st each year. 
  • Read the fine print: some lenders offer discounted rates on consolidated loans if you choose automated payments or if you pay on time.


New Law Enacted for Students Enrolling in College in 2014

The Health Care and Education Reconciliation Act gives student borrowers new choices in how they repay their federal student loans. The initiative will expand the existing income-based repayment plan for federal student loans. More than 1.2 million borrowers are projected to qualify and participate in this expanded program.

According to the White House website, under this new law, students enrolling in 2014 or later will have the following options:

  • Limit Payments:  Borrowers who choose to participate in the income-based repayment plan will make payments of no more than 10 percent of their income above a basic living allowance.
  • Remaining Debt Forgiveness:  Responsible borrowers who are making their monthly payments will see their remaining balance forgiven after 20 years of payments.  Public service workers  (teachers, nurses, and those in military service) will be entitled to remaining debt forgiven after 10 years.



Free Application for Student Federal Aid (FAFSA)
Complete and submit the FAFSA form to begin the student financial aid application process.  The form is free.  You do not need to pay anyone to submit it for you.

Federal Student Aid
U.S. Department of Education information about how to choose a college, qualifying and applying for financial aid, and managing student loans, including special loan forgiveness opportunities and requirements that are related to public service.  The site is available in both English and Spanish.

National College Finance Center
Nationally relevant information in multiple languages from the New York State Higher Education Services Corporation (HESC) about paying for college and repaying student loans.

College Scorecard
This search tool in English from the U.S. Department of Education allows you to compare college affordability and value.

College Navigator
Information from the U.S. Department of Education that can help you evaluate and select a high quality college.

The College Board
English: and
Helpful information about colleges, careers, planning and paying for your education.  The scholarship search link includes information in English about scholarships, research grants, other financial aid and internships.

Veteran Education and Student Loan Benefits
Information in English from the Veterans Administration about education and training benefits, as well as VA-approved schools. 

My Next Move
Information from the U.S. Department of Labor about skills needed for various careers, and earning potential for those careers.

National Association for College Admissions Counseling
Information about locating college fairs in your area.  Check with your guidance counselor for information about additional college fairs.

Database of Accredited Postsecondary Institutions and Programs
U.S. Department of Education information about school and program accreditation.  You can search the database by school name.

Consumer Financial Protection Bureau
This federal agency provides helpful tools and information about how to evaluate financial aid offers and student loans.  Consumers may also submit complaints about student loan problems.

Matches members to relevant scholarship opportunities free of charge. 

No-cost service for seeking and applying for scholarships.  This is a business.  Be sure to read the site’s privacy policy.  

This is a no-cost website in English, offering information about scholarships, loans, college sasvings plans and military aid, as well as calculators that can help you estimate college costs.

Student Loan Borrower Assistance Project / National Consumer Law Center
This website offers helpful information about how to manage student loan repayment issues.

Free Annual Credit Report
You are entitled to check your credit report at no cost, once per year.  This will help you understand your credit readiness before applying for loans.

National Student Loan Database System
Centralized database from the U.S. Department of Education where you can check on the status of your federal loan or grant.  You will need to get a Personal Identification Number or PIN in order to get access to the information.  Select “Financial Aid Review” to choose a PIN.  Check to see which company is servicing your loan; it may not be the same as your original lender.

Better Business Bureau and
BBB helps consumers find and recommend businesses, brands and charities they can trust.  Contact BBB to report check business reviews, report unethical business conduct and ask about possible scams. 


State-Specific Loans & Information

If you are not eligible for a federal loan, you may be eligible for a State grant or scholarship.  The following are some resources where you can begin your search.  Be sure to ask the financial aid counselor at your college about additional state-level possibilities. 

New York

  • New York State grants, scholarships, and award opportunities, as well as information about financial aid and borrowing

New Jersey


  • Connecticut student aid information, including information about the Connecticut Governors Scholarship Awards
  • The Education & Employment Information Center (EEIC) is a central source of free information for anyone who has questions about college, financial aid, careers and job training in CT.
  • The Connecticut Higher Education Supplemental Loan Authority serves as an alternative source of student loan funds.



© 2014 by the Education and Research Foundation of the Better Business of Metropolitan New York, Inc