Ask Carmen: Tips for choosing student loans

The Obama administration wants the government to get in the business of college ratings.

Worried about your student loans? Businessweek reports that "outstanding student debt topped $1 trillion in the third quarter of 2013, and the share of loans delinquent 90 days or more rose to 11.8 percent, according to the Federal Reserve Bank of New York." All other types of debt is decreasing.

Student loan expert Heather Jarvis stopped by the show to give us a few tips on choosing student loans:

"Fill out the free application for federal student aid (at FAFSA.ed.gov). Whether you believe you qualify or not, whether it’s undergraduate school or graduate school, because that’s the foundation of all financial aid, including institutional aid or scholarships that a school might be able to provide. As well as all the different loan programs."

"Avoid private student loans. Because interest rates in the market are so low, private student loans might look like a good option, and they can be appropriate for people in certain circumstances. But they are in general, more expensive and risky than federal student loans. They tend to have higher interest rates that are variable and sometimes can go up with no cap. Focus on [federally-subsidized] Perkins Loans if you can qualify, then the un-subsidized Stafford loans. [When it comes time to pay loans], you’ll want to pay those that are more expensive for you and do not have a subsidy more aggressively."

Want more advice? Listen to the interview above, or check out our post: "How to get rid of your student loans without paying"

About the author

Carmen Wong Ulrich is the former host of Marketplace Money, APM’s weekend personal finance program.

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