Locking up the right student loan

As education costs continue to escalate, parents with an eye on college tuition continue to look for ways to pay the tab. More and more, many parents are advising their children to stay in-state and look at public universities, where the tuition is lower and they'll be eligible for residency reductions that can greatly decrease tuition costs.

However, such an attitudinal shift has led to many public universities raising their admission standards, making it harder for students to gain admission to the main campus at some of the nation's top-flight public schools. While many of the nation's larger public universities have branches scattered throughout their state, oftentimes students hope to gain entry into a school's main campus branch, where typically more opportunity exists with respect to both education and extracurriculars.

Heightened admission standards have left students, however, out in the proverbial cold, forcing them to make difficult choices that are often heavily influenced by financial concerns. While most parents would prefer to keep their children as debt-free as possible, student loans can be a great way to get the best education and the most out of the college experience. Fortunately, a host of federal loans exist that can make attending college more about where your child wants to go, as opposed to where he can afford to go.

+ Federal Perkins Loan. These loans are available solely for U.S. citizens or permanent residents attending college on a full- or part-time basis. Open to both undergraduate and graduate students, Perkins loans are low-interest loans (fixed at five percent for the life of the loan, according to Sallie Mae) where eligibility is determined by individual university's financial aid offices. These are typically more difficult to get than other loan types, as funds are limited and colleges are often very selective as to whom they approve for Perkins loans.

+ Federal Stafford Loans. Stafford loans, which can be subsidized or unsubsidized, are the most common student loans, available to both undergraduate and graduate students, so long as they are U.S. citizens or permanent residents.

Subsidized loans are the better option for most, as the government pays the interest on the loans while a student is in school and throughout the grace period until repayment begins. However, the subsidized loans are need-based, meaning not everyone will necessarily qualify. In addition, limits on these subsidized loans pale in comparison

to the Federal

Perkins Loan. Also, interest rates on subsidized Stafford loans fluctuate, capping out at 8.25 percent.

Unsubsidized Stafford Loans allow students to borrow more annually, but the government does not pay the interest that accrues while the student is attending school or during the repayment grace period thereafter. But unsubsidized Stafford loans are not need-based, meaning all full- or part-time students (graduate or undergraduate) who are U.S. citizens or permanent residents are eligible.

+ PLUS Loans. Federal Parent Loans for Undergraduate Students (PLUS) differ from both Perkins and Stafford loans in that they are loans to a student's parents, as opposed to the student himself. These are designed to cover the entire portion of a student's tuition that parents plan to pay. Unlike other Federal loans, however, a credit check is required, though no income or asset requirements are made. These loans, which come with variable interest rates, can be applied for through loan providers such as Sallie Mae or through the financial aid office at your student's school.

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