What should you look for in a private lender? All federal loans grant a six-month grace period after graduation before your student has to start paying the loan back, so try to find a private lender that gives some breathing room as well. This is important because you don't know how quickly your child will be able to find a job, and if she doesn't have the income to pay, you don't want her to default and put a black mark on her credit report. Another thing to look for is a company that doesn't charge a fee for prepaying if she does happen to have extra cash during that grace period (this is a great use for those graduation gifts!), you want to be able put it toward the loan without paying a penalty. Anything you can contribute early will lower your total cost of borrowing.

Don't overborrow.
Advice on how much is too much varies. Some people, like Mark, say you shouldn't take out more than your expected starting salary, but that can be hard to estimate, particularly because so many people change majors midway through college or take a job outside of the their field after graduation. At the very least, don't borrow more than the cost of tuition, and less is always better. Remember that this is money that is paid back, and if it's used for things like new shoes or a daily latte, your child is going to regret it later. Encourage your student to keep loans at a minimum and instead get a part-time job or see if she's eligible for work-study to pay for any extras.

Select a repayment schedule.
The standard repayment time on federal loans is 10 years, but there are a range of options available. If you select a longer time frame, payments will be less each month, but you'll be paying more money in the long run due to interest. For instance, if you switch from a 10-year to a 20-year repayment plan, your monthly bill will be cut by about a third, but you'll more than double the interest paid, Mark says. It's up to your student and her budget, so sit down and figure out the maximum amount you can afford each month. She can always increase it—or even decrease it, if need be—later.


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