Receiving a letter of acceptance to your dream college marks a milestone in your life. However, it is only a partial victory because you still need to figure a way to pay for the tuition fees. Like most students in the country, quite often, your only option is a student loan. However, many people find student loans quite tricky to understand. So, here are some points to keep in mind before taking a student loan.

Federal or private loan
Every student has two main loan options. One is a federal loan directly funded by the government. The second option is a private loan funded by a bank or a private lending company. Both of these loans have their advantages. While federal student loans will often offer fixed interest rates and a possibility of rearranging payments based on income, private student loans may be more tempting because of their lower interest rates. However, financial experts advise students to always consider federal loan options before going for a private student loan.

Know your grace period
A grace period is the amount of time the bank gives you before you need to make your first payment. The grace period is not the same for all student loans, and it can vary significantly from one financial institution to another. So, do a bit of research and choose the loan option that gives you the maximum grace period. It will let you save money from at least a few paychecks before making your first payment.

Know variable and fixed rates
Most students get stumped on this point. Under a fixed interest loan, the rate of interest stays constant for the life of the loan. For a variable interest loan, the interest rates fluctuate. A variable loan could start with a lower interest rate than a fixed rate loan, but the rate of interest can rise significantly during the life of the loan. Thus, a variable interest rate loan can prove costlier in the long run. Your best bet is to play safe and go for a fixed rate loan.

Understand payment tenure options
When taking a loan, you can choose the period over which you pay off the loan. While picking a longer duration might make your monthly installments seem small, you end up paying a high interest rate. Conversely, if you choose the least amount of time to repay your loans, you may end up with a high monthly installment but a much lesser payment during the short duration. Always calculate well and opt for the shortest repayment time that you can afford.

Know the ideal limit
When it comes to student loans, more is never good. Experts advise taking a loan amount up to a maximum that will not exceed the student’s expected annual income as soon as he or she graduates. A high student loan will make repayment hard, and it is never advisable to start one’s life in deep debt.