Three Tips for Finding the Most Affordable Student Loan

Making the smart pick upfront will save you money later.

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Lenders' new distaste for making loans to risky borrowers is bad news for those who find federally backed education loans too small or expensive. But experts say with a little extra legwork, borrowers who can convince banks that they have good credit should be able to find reasonable deals.

Shop. Getting quotes from three or four lenders and checking with your school and with local nonprofits can save thousands. The College Foundation of North Carolina has some alternative loans charging a floating rate that is currently just 5.79 percent. A Web tool for searching student lenders can be found at simpletuition.com/usnews. A list of nonprofit lenders, which tend to have lower rates, can be found at efc.org.

Don't bother with lenders who won't reveal exact terms without a signed contract, though.

Scrutinize. Be sure to ask for an annual percentage rate—with all fees included—so you can compare apples with apples, advises Tim Ranzetta of Student Lending Analytics. And ask when the lender adds or "accrues" interest. Loans that add interest while the student is in school will cost more than those that wait until the student finishes. A list of lenders that use the cheaper accrual method is at studentlending analytics.com.

Experiment. Fynanz.com, Greennote.com, and Virgin money will help students arrange loans from friends or relatives.