John W. Schoen Senior producer • Profile • E-mail

No matter which lenders schools recommend, the best loan program for one student may not be the right one for another family. As complex as the process is, a little homework can save hundreds or even thousands of dollars over the life of the loan.

There are three basic loan types: direct loans, subsidized private loans (known as Federal Family Education Loan Program) and unsubsidized private loans. In addition, the basic Stafford loan (available both directly and through FFELP private lenders) carries a maximum interest rate of 6.8 percent — though many lenders discount this. PLUS loans (also available through direct or private lenders) carry an 8.5 percent rate cap, but some lenders offer lower rates. Unsubsidized private loans carry no rate caps.

Schools have negotiated a variety of other breaks for student borrowers from lenders they put on their preferred lists. Here are some things to look for:

• Discounted interest rates
  Though Stafford loans carry a maximum of 6.8 percent, some lenders will cut that to as low as 5.5 percent, according to Kantrowitz. On PLUS loans, the maximum rate is 8.5; some lenders will go as low as 6.5 percent. The lowest rate Kantrowitz has seen on private student loans is 6.35 percent.
  
• On-time payment discounts
  If you’re a good bill-payer, this can save you money. Unfortunately, this discount usually goes by the wayside: Kantrowitz says that only about 20 percent of borrowers make their first 36 payments on time. If you’re a late bill payer, this discount won’t help.
  
• Waiver of origination, default fees
  Stafford loans carry a 2.5 percent fee that’s deducted from the loan balance up front. Some lenders will waive the fee. One caution: If you later consolidate your loans with another lender, you may have to repay the fee.
  
• Discounts for automatic debit
  If you don’t mind having your student loan payments debited directly from your checking account, you can save another quarter or half a percentage point from some lenders. Unfortunately, fewer than one in six borrowers sign up for it.
  
• Payment forgiveness
  If you have a good payment history, some lenders will let you skip the last few payments.
  
• Late payment
  Some lenders will consider your payment late if it’s not in their hands by the due date every month. Many will give you a grace period of 15 or 30 days.
  
• Customer service
  The level of service you can expect varies widely. Look for a lender that offers phone advice or answers to billing questions 24 hours a day and has a Web site you can go to for additional help or information.
  
• Problem solving
  If you have a billing dispute or need help, some lenders are much better than others at resolving the problem. Schools are often a good source of information; with a bad lender, they have to wait on hold forever, too.

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