How to Reduce Your Borrowing Costs

It may be a wise move to borrow—in moderation and carefully—for your graduate education.

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Updated 7/21/08

If you can't get enough grants or scholarships, and have done all you can to reduce your costs, it may be a wise move to borrow—in moderation and carefully—for your graduate education.

1) Borrow as little as possible. Try not to borrow to fund living expenses, and keep your living expenses as low as possible. Remember the old saying: If you live like a lawyer when you're a law student, you'll have to live like a law student when you're a lawyer. (Those loan payments can really sap your paycheck.)

2) Check out your future salary, and the earnings records of the graduates of your school, to see how much you can reasonably afford to put toward debt payments when you finish school. Use a loan repayment calculator to estimate how much that means you can afford to borrow now.

3) Look for loans with the lowest interest rates and fees available. Check with your school, or charities and agencies like these, to see if you qualify for a loan charging no interest at all.

4) Fill out the FAFSA to qualify for low-cost federal student loans.

5) Before charging tuition on your credit card or signing up for a private loan, check out the cheaper and safer federal student loan programs.

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6) If your university allows you to shop for federal student loans, don't sign up with one of your school's "preferred lenders" without first checking for lower cost lenders who might not be on the list, including your state's nonprofit lender, or using a web loan shopping tool

7) See if you can qualify for one of the many loan repayment or loan forgiveness programs, so your employer—not you—pays off your student debts.