Is a Student Loan Right for Me?

Answer these three questions before you borrow for college.

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1. See if you are eligible for federal student loans, which are typically the cheapest and best deals. To qualify, you must be a U.S. citizen or permanent resident, attending school at least half-time (as your school defines that) , and not in default on previous federal student loans. 

If you're not eligible for a federal student loan, you can apply to a bank or lender for a private loan. But those are hard to get, expensive and risky. So it can be wiser to instead search for ways to reduce your costs by cutting your living expenses, finding cheaper college courses, and tapping alternative funding such as scholarships or your employer's benefits. 

2. Figure out how much you'll need to borrow by calling your college's financial aid office and asking what your net price will be after all grants and scholarships are subtracted. (Make sure that only grants and scholarships are subtracted, and not work-study earnings or expected loans.) If you'll need to borrow more than about $6,000 a year, and you're not studying for a comparatively stable high-paying field such as engineering, it might be smarter to search for a less expensive college or other funding alternatives.

3. Investigate your likelihood of being able to repay the loan. Check out your likely earning power with tools like the Human Capital Score, salary predictors and the percent of previous graduates of your college who are repaying their federal student loans. If these tools indicate you will earn a comparatively low salary, or your college has a low repayment rate, rethink your plans, consider other colleges, search for ways to reduce your costs, or find alternative funding. 

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