What to Look for in a Student Loan

First Seacoast Bank • October 05, 2023
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Going to college is an exciting time in anyone’s life and is a big step toward shaping your future. Regardless of your course of study, plotting your collegiate journey comes with significant financial implications that are essential to plan for at the outset. The cost of higher education in the United States is high, and most students need to take out a student loan to cover tuition and other expenses. 

When shopping for a student loan, it's essential to find one that benefits you the most, providing the funds you need without jeopardizing your finances in the long run. So, how do you choose the best student loan for your needs? It’s not an obvious answer on the surface, and we’re here to help you figure out the best path forward. With that in mind, here are some tips to guide you through the selection process.

5 Considerations When Looking for a Student Loan

Loan Types

A significant factor to consider when looking for a student loan is the type of loan. The two primary types available are federal aid and private loans.

Federal Student Aid

The primary place most students begin when making college selections is the FAFSA, or Free Application for Federal Student Aid. This is the entry point for all federal student aid, regardless of the type (subsidized, unsubsidized, grants, or work-study programs). 

You may qualify for federal aid based on several factors, including your need and the amount of money your primary caregivers make. Some forms of aid will not require you to repay after the conclusion of your studies, while others will require full repayment plus interest.

Federal loans are issued by the government and typically come with fixed interest rates, lower payments, and more flexible repayment plans. It’s important to fill out this application in a timely fashion, as there is a limited supply of federal student aid that can be allocated across the country each year.

Private Student Loans

If you don’t receive the federal student aid you need, don’t worry—you have other options.

Private student loans are offered by financial institutions and may have either variable or fixed rates. They tend to be more expensive than federal loans because they have higher interest rates, and often require a co-signer due to their stringent eligibility requirements. Private institutions are more careful about their borrowers due to the nature of volatility that exists with the inherent managed risk.

Interest Rates

Just like other loans, student loans come with interest rates. Some loans have variable rates that fluctuate based on market conditions, while others come with fixed rates that remain constant throughout the life of the loan. 

Each rate type has pros and cons, so you should weigh the risks and understand how they influence your overall payment. Fixed rates give you consistency and predictability, as you know exactly how much you'll pay throughout the loan's duration. Variable rates, on the other hand, can be more unpredictable but might be beneficial if market conditions are favorable.

Your Credit Score

Credit scores significantly impact your ability to get a loan, and they determine the interest rates for which you’ll qualify. 

Your credit score is a numerical representation of your creditworthiness based on factors such as payment history, outstanding debts, and length of credit history. Lenders use credit scores to evaluate the risk of lending money to you. Generally, the higher your credit score, the better the interest rate you'll receive. 

An important consideration here is that it’s difficult to accumulate credit before you turn 18, which can mean your credit score is lower than you want it to be to secure a good interest rate.  Student loans pose an interesting situation in this regard, but credit scores are not taken into account for federal student loans.


Having a co-signer is one way of securing a student loan, especially if you're under 18, lack proof of income, or have very little credit to your name. A cosigner is typically a trusted adult with a good credit score and willing to share responsibility for the loan. 

The advantage of having a co-signer is that you increase your chances of approval while gaining favorable interest rates. However, having a co-signer also means they become liable for your loan if you fall behind on payments.

Research and Comparison Shop

Before signing a student loan agreement, do your research and shop around. Don't settle for the first loan that comes your way without comparing it to the competition. Use online comparison tools to see how each lender matches up and what they can offer you. Don't be afraid to ask questions and seek clarification on terms, fees, and other details that are important to you.

Most importantly, use online calculators to determine what the estimated payment will be once the loan comes to fruition.

Need Some Additional Assistance?

Choosing the best student loan for your needs can be an overwhelming and confusing experience, but it doesn't have to be. With proper planning, you can advance your education confidently while minimizing your financial stress.

If you’re in need of private student loans, we partner with the New Hampshire Higher Education Loan Corporation (NHHELCO) in order to provide student loans and student loan refinancing for our customers. You can learn more here or contact us to ask questions.