Start with Subsidized

• The best student loans are subsidized federal loans for students who demonstrate financial need. These loans not only have the lowest interest rates, but the federal government also pays the interest while the student is in school and while payments are deferred. This adds up to significant savings for the student. To apply for subsidized federal loans, fill out the FAFSA. Accept all subsidized Perkins and Stafford loans offered by the federal government before moving on to alternate funding sources.
  
  

Maximize Federal Aid

• Even students with no financial need can qualify for unsubsidized federal student loans. As of 2011, Stafford loans for undergraduate students offer between $5,500 and $7,500 per year, depending on the student's year in school. Graduate student loans offer up to $20,500 per year. All of the unsubsidized Stafford loans have an interest rate of 6.8 percent and the option to choose between a few different repayment plans, one of which uses the student's income to help determine the monthly payment amount. Graduate students can also obtain federal PLUS loans up to the full cost of attendance, so they should never have to use private student loans.
  
  

Compare Private Loans

• Banks and credit unions offer student loans that can help students complete their funding for school if they have already exhausted their federal aid. When selecting a private student loan, compare the terms of each loan. Look at the range of interest rates, the length of the repayment term and the upfront fees involved in opening the loan. Some lenders offer benefits, such as cash-back bonuses or interest rate reductions for making on-time payments, which can help reduce the cost of the loan. Also consider whether the lender services the loan or if another company will be collecting payment. The company that services the loan should offer 24-hour customer service by phone and an online interface for managing the loan.
  
  

Choose a Co-Signer

• Students often cannot qualify for private student loans on their own because they have little, if any, credit history. Therefore, private lenders typically require that the student have a co-signer who agrees to make payments on the loan if the student fails to, which protects the lender from loss. The co-signer's credit score also helps determine the interest rate the loan will have. A student only needs one co-signer, so he should choose a parent or other relative with an excellent credit score to help get the lowest interest rate possible.