Watching Your Wallet: What to consider on student loans

FRESNO, Calif. (KFSN) -- It's one of the biggest financial commitments a student will make in their lifetime and they're making it at just 18 years old, some even younger.

"There are federal loans, private loans, state loans, some schools offer their own loan programs. In general, federal loans tend to be more preferable to private loans," Betsy Mayotte says. "Not because of the interest rates, although sometimes, but because federal loans have more safety nets if there's a financial crisis in the future."

The Institute of Student Loan Advisors (TISLA) is a non-profit that provides free student loan advice.

Founder Betsy Mayotte says when deciding which loan program is best, there are several factors to take into consideration, but start by thinking long term.

"If your school of choice means that you're going to have to borrow $10,000 for this year, you should be multiplying that by five because a lot of students actually take five years to finish their four-year degree," Mayotte said.

If taking out a private loan, look at reviews of lenders and check if the interest rate is fixed or variable.

But what happens if you can't pay? Are there safety nets? Is a co-signer required?

According to the U.S. Department of Education, 42.7 million student borrowers have federal loan debt totaling close to $1.7 trillion.

On average, a borrower's federal student loan debt balance is more than $38,000 ($38,375), while the total average balance, including private loans, is roughly $41,600 ($41,618).

"4,900 federal loan programs also have parent plus loans," Mayotte said.

For families making the college choice now, the budget reconciliation bill changed the loan limits for graduate students and parent-plus borrowers.

"If you need to borrow in year one, you need to look at the new maximum amounts that you're allowed to borrow and make sure you're not going to run out of borrowing power before the degree is completed," Mayotte said.

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