Fixed Interest Rate

• The safest type of loan for the purposes of repayment is one with a fixed interest rate. That way, you will not have to worry about your monthly payments increasing if the interest rate goes up. As of April 2011, all new federal student loans have fixed interest rates. Private student loans, on the other hand, usually have variable interest rates. When you get the loan, your interest rate will be an index rate, such as LIBOR or the prime rate, plus a specific margin. If the index rate goes up, the interest rate you pay will increase as well. Although there are usually caps on how high the rate can get, it can get significantly higher than the fixed rates on federal loans.
  
  

Flexible Repayment

• Another factor that influences a loan's safety is the repayment plan. You should get a loan that has a grace period, which is a time of at least six months after your graduation when you do not have to make loan payments. Federal student loans have a grace period, but not all private student loans do. Another factor in repayment is the variety of payment plans. In general, federal student loans have greater flexibility than private student loans in allowing you to base your payment amount on your income and defer payments when you are not making much money.
  
  

Subsidized Interest

• Within the category of federal student loans, the best ones are subsidized Perkins loans and subsidized Stafford loans. These are best because the federal government pays all of the interest that accrues on the loan while you are in school. Plus, the loans have interest rates of 5 percent for Perkins loans and 3.4 percent for Stafford loans issued to undergraduates for the 2011 to 2012 school year. Subsidized loans for graduate students and for school years beginning in 2012 or later have an interest rate of 6.8 percent.
  
  

Other Good Loans

• If you do not qualify for subsidized Stafford or Perkins loans or you have gotten the maximum amount for which you are eligible and you still need to borrow more, the next-best type of loan is the unsubsidized Stafford loan issued by the federal government. It has a fixed interest rate that is no higher than 6.8 percent, as of April 2011. Graduate students and parents of undergraduate students can also get PLUS loans at 7.9 percent interest to meet the gap between the financial aid package and the cost of attendance.