Whether you think you’ll need school loans or not, you should first fill out the FAFSA (Free Application for Federal Student Aid). The government and your school will use this form to determine your eligibility for federal loans, work-study programs, grants and state and institutional aid. If you want to have an idea of what your package will look like before filling out the FAFSA, use the FAFSA4caster tool.

Even if you don’t think that you will be eligible for federal aid because you or your parents make too much money, you should still complete the FAFSA. There are certain federal loans with excellent terms that are available to anyone—regardless of your income—but they are based on your FAFSA data.

Fill out the FAFSA as early as possible

Technically, you can’t submit the form before January 1st of the year you plan to enter college due to required tax information, but you should download it and begin filling it out as early as November. Deadlines for aid from state institutions that dole out their own grants and loans are often earlier than federal deadline, but the states use the FAFSA, too. Also, some colleges distribute financial aid on a first-come, first-served basis, and they’ll need a completed FAFSA in order to consider your application.
Once you’ve completed the FAFSA and your school has crunched the numbers, they’ll send you a financial-aid packet that should indicate the total expenses of the school (tuition, room and board, etc.) minus the aid that the school is offering you, although each award letter is organized differently. The number that is left over—your Expected Family Contribution—is what you will be expected to cover on your own. However, the EFC may not always be realistic in terms of what you can afford to pay, and you’ll often need loans to cover the difference.

Whether you’re a prospective freshman looking over your aid package for the first time or a new graduate beginning to pay back your loans, following these tips could help you reduce your student debt and get the best possible loan terms:

Try to negotiate a better package with your school
Many people don’t realize that you can often go back after receiving your financial aid package and negotiate a better one. Federal aid programs give financial aid officers authority to make adjustments. If you can’t afford to attend the school with the aid that you’ve been given, you should call a financial aid officer and say so. Sometimes this involves filing an appeal form that takes some time to process.

Just be polite but firm and draw attention to anything the school may have overlooked, like a death in the family, when examining your family finances for a particular year. Have documentation ready to prove any big change in circumstances.

You might be surprised how cooperative schools can get when they think they might lose you. In fact, you can file an appeal every year that you’re in school if you feel you have been awarded too little. You have little to lose by trying.

Avoid private loans at all costs
We’ve hammered away at this point, but it can’t be said enough. If you’re taking loans, turn first to federal loans and only take private loans if it’s absolutely necessary. With federal loans, you have the security of a lower, fixed interest rate and a more generous repayment schedule. It’s also difficult to shop for private loans because you don’t know the interest rate you’ll be charged until you apply. If you apply through numerous lenders, this can be a blow to your credit when they make separate inquiries into your creditworthiness.

Repayment terms on private loans are not as attractive as they are on federal loans. You have to start paying them back as soon as you take them out, unless you defer the payments until after you leave school. In that case, interest will build up and get added to your balance while you’re still in school, as with unsubsidized Stafford loans, but at possibly more than double the interest rate.

Once you graduate, the differences become starker. With subsidized federal loans, if you’re experiencing some kind of hardship, lenders will let you push back repayment without charging you interest. If a private lender allows you to defer payments at all, the interest will keep piling up. And at interest as high as 18%, this can be a real downer. There’s no private-loan forgiveness program for public-school teachers and police officers, as there is with federal loans. And if you happen to die young, your family will get stuck with the remainder of your balance. Basically, private loans may actually make you wish you did die young.

Shop around for the optimal lender
When choosing a lender for federal loans, don’t just shop the banks or use the lender your school tells you to. It’s also worth checking out state agencies like Mohela, since they often offer special discounts.

Talk to multiple lenders, and make a chart comparing the costs. For instance, some companies will only give discounts or waive certain fees if you ask. And remember, it is your right to shop around for loans. You are not bound to use a lender on the preferred lender list that most schools send you and may try to push on you. This list of lenders is a mere recommendation. Still, don’t ignore these lenders either since your school may have worked out some sort of deals with these businesses.

In some cases, if you find a lender on your own independent of your school, you might encounter loan processing delays, extra paperwork, and unwillingness from your financial aid office to process the loan. However, this is completely illegal and the financial aid office is required by law to process a loan with any lender you choose.

Think about a career that qualifies for loan forgiveness
If you take a job in public service, you may qualify for loan forgiveness that reduces your education debt. For instance, teachers or nurses working for governmental institutions can benefit from debt forgiveness. It’s meant to encourage young adults to take lower-paying federal and state jobs or volunteer for public service. As an incentive, the government pays off part or all of your student loans. In nearly all cases, this perk applies to government loans only.

The amount of you receive depends on the type of work you do. FinAid has a full rundown of programs that offer to repay some of your student loans.

Inquire about borrower benefits and discounts
If you ask, some lenders will waive the loan origination fee, a cost that’s incurred when you first take out the loan. Others will give you a break on interest after a pre-set amount of on-time payments. Or you might receive an interest reduction for enrolling in a direct-debit option that lets lenders suck payments directly from your account each month. Other still might forgive your loan balance if it gets below a certain amount or wipe out your last six months of repayment.

These discounts can be very beneficial, but pay attention to the fine print. The number of on-time payments that you must make before receiving the rate discount is sometimes as many as 48 payments, and even after you receive the rate reduction, you can still lose the discount if you are late just one time. Most young people don’t succeed at making consecutive 48 on-time payments. The lenders, knowing this, tout this as a benefit even though few people qualify for it.

If you consolidate, you sometimes have to pay back rebates you might have received. With some discounts, lenders require you to have a minimum loan balance to qualify. Ask lenders a lot of questions about their policies and look for deals that are easiest to attain.

Know your options for repayment
Federally guaranteed loans generally have much more attractive repayment terms than private loans. It is typically very easy to ask for a deferment or forbearance if you experience difficulty repaying your federal loans or cannot find employment. A deferment is a suspension of the loan—with interest not charged on subsidized federal loans—that lasts up to three years in the case of economic hardship or unemployment. A forbearance is a limited period—granted at the discretion of the lender—during which payments are postponed and interest is charged regardless of the type of loan.

If you have a subsidized loan, you won’t have to pay interest in the time that you are deferring your loan. And even with the unsubsidized loans, there is a grace period before you have to start paying the money back.

With federal loans you can explore alternative options to standard repayment, such as extended repayment, graduated repayment, income sensitive repayment for Stafford loan borrowers and income contingent repayment for Direct Loan borrowers. These are payment plans that can lessen your payment burden in the short-term to allow you time to get established in your career.

Deferments and forbearances aren’t always granted by private lenders, and there is no grace period. You want to find a lender that will allow you to defer payments in the case of economic hardship and extend your repayment term if you need to. Since private loans are not controlled by the government, it is entirely up to the lender if they want to grant you these options. However, remember that even if a private lender allows you to defer payments, the interest will still build up and be added to your original balance. That technically makes this a forbearance rather than a deferment, although lenders tend to use these terms interchangeably to confuse people. You should try to at least pay your interest each month to keep future payments from spiraling out of control.

Finally, if you drop out of school or take time off, your grace period kicks in for federal loans. So you won’t have to make payments for six months on your Stafford and for nine months on your Perkins. But you’ll have to start paying back your private loans immediately. If you chose to defer your private loans until after you graduate, you would still have to start paying them back if you take time off. To qualify for in-school deferment, you have to be just that—in school.

Don’t default on your student loans
This sounds obvious, but sometimes young adults let their loans slip into default. The consequences can be severe. You can have your wages confiscated, your tax refunds withheld, and your credit damaged. You may also end up in court and have your social-security checks withheld once you retire. Neglecting to pay off your student loans is a serious matter, and you should call your lenders and arrange payment options in order to preempt such trouble.

Want to Know More?

• What are Student Loans?
• Do You Need Student Loans?
• Grilling Guide: Questions to Ask Lenders and Your School