Key Points:

• If you need to borrow beyond the federal Direct Subsidized and Unsubsidized student loan, shop around and compare multiple lenders’ interest rates, loan terms, fees, and other conditions.
• MEFA’s loan rates for the 2024-2025 academic year are fixed at 5.75%-8.95% APR* with no application or origination fees.

By now, many families with college-bound students have successfully completed this year’s financial aid process and are on to the next task: finding an affordable loan to cover any remaining college costs. How can students and parents do this? Shop around and compare options to reduce the overall cost of borrowing, MEFA advises.

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(Graphic: MEFA)

Borrowers should take note of each lender’s interest rates, terms, and conditions, and be certain to consider the total cost of borrowing across all years of enrollment. By doing so, savvy borrowers could save thousands of dollars in interest and fees.

“For many students, college continues to be a solid investment in their future. In addition to considering the cost of tuition when deciding on a college, families shopping for college loans should compare the rates, terms, and conditions to find the one right for them, just as they would when buying a car, a new television, and other big-ticket purchases,” said Thomas Graf, Executive Director of MEFA.

MEFA encourages potential borrowers to first complete the FAFSA® (Free Application for Federal Student Aid) and receive the maximum amount available in Federal Direct Student Loans. These loans offer favorable terms and conditions, including a guaranteed fixed interest rate, an option to be consolidated, and multiple repayment options.

If additional funds are needed, consider private loan options. Before borrowing, MEFA's experts suggest shopping around and doing your homework. How?

1. Understand how interest rates work and what may impact them.
   
   Education loan lenders offer a range of both fixed and/or variable interest rates, though only borrowers with excellent credit histories are awarded the lowest rates. The repayment option selected will also impact the interest rate. For example, delaying repayment until after graduation typically increases the interest rate. A loan's interest rate can significantly affect the loan's total cost. MEFA's Student Loan Payment Calculator shows how different repayment options impact the total cost of a MEFA Loan.
   
   
   
   
2. Compare private loan details carefully.
   
   Every private lender is required to provide an Application and Solicitation Disclosure that details the cost of the loan, including fees. This document should be available on a lender's website. Before borrowing any private loan, it’s recommended to compare the information included in these disclosures. MEFA's webinar, Comparing College Loan Options, offers a primer on reading and understanding them.
   
   
   
   The Undergraduate Application and Solicitation Disclosure for the MEFA Loan details MEFA’s fixed interest rates for the 2024-25 academic year between 5.75% and 8.95% APR*, with no application fee, no origination fee, no late charges, and no returned check charge. It includes examples of loan costs for various repayment options, including 10- and 15-year loans, immediate repayment, interest-only repayment while enrolled, and deferred repayment. MEFA undergraduate, graduate, and refinancing loans are available to qualifying borrowers nationwide.
   
   
   
   
3. Make sure you understand what a PLUS Loan is, and how it works.
   
   The Parent PLUS Loan is a federal loan designed to help parents pay for education expenses that are not covered by other financial aid. The U.S. Department of Education is the lender and the interest rate for 2024-2025 is 9.08% with a 4.228% origination fee.

MEFA's college planning experts are available to help students and families navigate the education loan process via phone at (800) 449-6332 or via email at collegeplanning@mefa.org.

Visit mefa.org for all of MEFA's expert college planning guidance including free webinars, helpful videos, the MEFA Podcast series, and the MEFA blog with articles covering a full range of college planning topics, including Tips for Private Student Loans.

*The Annual Percentage Rate (APR) is designed to help consumers understand the relative cost of a loan and reflects the loan's interest rate, timing of payments, and fees. MEFA's lowest rates are only available to the most creditworthy applicants.

About MEFA

MEFA is a state authority, not reliant on state or federal appropriations, established under Massachusetts General Laws, Chapter 15C. MEFA’s mission, since its founding in 1982, has been to help Massachusetts students and families access and afford higher education and reach financial goals through education programs, tax-advantaged savings plans, low-cost loans, and expert guidance. All of MEFA’s work aligns with the ever-present goal to support the independence, growth, and success of Massachusetts students and families. Visit mefa.org to learn more or follow MEFA on Facebook, Instagram, LinkedIn, Twitter and YouTube.

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