Choosing an education loan? What to know to borrow smart.

Written by
Emily Stetson

August 5, 2020


VT student on campus

For many students (and their parents), attending college this fall — whether that means online or on campus — likely involves taking out an education loan to help cover the tuition bill and other expenses. Nearly 7 out of 10 Vermont families need to borrow to help pay education costs. So if you’re among that group, you’re not alone.

With the bills coming due soon, parents and students need to decide how much to borrow, what type of loan to get, and what lender to use. It’s a lot to consider, and with everything else that parents and students are wrestling with this fall, it can be overwhelming. We want to make it easier for you.

At VSAC, our goal is to help students and parents better understand the details — and their choices — so that they borrow only what they need and minimize their cost of borrowing.

To help you make the best financial decisions for your family, we recently held a webinar on how to choose education loans, featuring a panel of Vermont financial aid experts: Marilyn Cargill, vice president of VSAC’s financial aid services, research and marketing; Greg Davis, director of financial aid at Champlain College and past president of the Vermont Association of Financial Aid Administrators; and Deborah Lessor, VSAC manager of private loan origination (and the parent of 5 students who have attended and successfully paid for college!).

View the full webinar here, or click on the link below.

Some highlights to get you started:

Apply for “free” money first. Before you even consider a loan, access all the “gift” money that you are eligible for by filling out the FAFSA (the Free Application for Federal Student Aid) and the Vermont grant application. This is the first step to open up all the free aid (money that does not need to be paid back) available to you. Learn more at and IMPORTANT: If your financial situation has changed, especially due to COVID-19, you may be able to ask for additional free aid.

Not all loans are created equal. Learn about the differences between federal student loans, federal parent and graduate student loans, and the many variations of nonfederal (also called “private” or “alternative”) loans from your school, state agencies such as VSAC, and commercial lenders. Compare all your options carefully (we call it “shopping” for loans).

  • Start with federal student loans: Borrow federal Direct student loans first, because they offer income-based repayment and other repayment options and benefits.
  • Compare all other loans, including federal Direct parent loans (known as “PLUS” loans), for the lowest rates and best repayment terms. Understand the total amount you’ll need to pay back. 

Borrow only what you need. It’s tempting to borrow the full amount of loans you may be given in a financial aid offer, but keep in mind that all loans are borrowed money that must be paid back with interest. This means that the amount you repay will always be more than the amount you borrow. Your goal should be to minimize loans as much as possible.

Remember, all loans are borrowed money that need to be repaid with interest. It’s important to compare all of your loan options and understand the costs and terms. You get to decide whether to accept some or all (or none) of the loan amounts offered in the student’s financial aid offer. Think carefully about how much you really need before you borrow.

Consider interest rates, fees, and repayment. Fixed interest rates stay the same over the life of the loan. Variable interest rates change with the financial markets (the rate can go up!). Variable rates may seem great at first but can end up costing a lot more over the life of a loan. Beware of “teaser” interest rates for which few people actually qualify. Never sign/approve a loan without knowing what you might ultimately pay and determining all possible interest rates, costs, and fees and how they impact what you must repay. Also consider when you’ll need to start repaying the loan, what the monthly payments will be, and any options for reduced or suspended payments.

And, yes, VSAC offers education loans, too. Vermont students and families have access to VSAC’s student and parent loans for undergraduate and graduate education. Out-of-state students studying at a Vermont school can also apply for VSAC loans.

For the 2020-2021 academic year, VSAC offers loans with a fixed rate as low as 3.99% APR—our lowest fixed rate ever. VSAC education loans can be used by Vermont residents going to programs anywhere in the U.S. or internationally AND for any students attending a Vermont school. If you’ve already maximized available federal Direct student loans, a VSAC loan may be your lowest-cost option.

Have questions or need more information? VSAC is here to help you. Serving our community is at the heart of all we do. During this ever-changing time, we remain available and committed to help you navigate all your career and education needs. No question or worry is too small or too big to reach out to us and ask for assistance.

For information on college and career planning and decisions, go to and also check out our online workshops and resources and online events. For an update of how we can help during the COVID-19 crisis, click here. You can also give us a call at 800-226-1029, 8 a.m. to 4:30 p.m., Monday through Friday and reach us via email at