A school's preferred-lender list is only a starting place when shopping for college financing

Here are tips for students and parents shopping for the best college loan deals:
See if you qualify for interest-free educational loans offered by charities and governments.

Stick with the federal educational loan programs-Perkins and Stafford for students and PLUS for parents, says Stuart Siegel, a private counselor in Erie, Pa. While the federal loans have fixed rates ranging from 5 to 8.5 percent, private or alternative loans typically have interest rates that rise and fall with the economy. Rates have been rising recently, which increases borrowers' costs and payments.

Fill out a FAFSA, or Free Application for Federal Student Aid, to see which federal loans you can qualify for. The Perkins program is the single best deal, offering students loans at a fixed 5 percent. Subsidized Stafford loans are the next best deal, charging a maximum of a fixed 6.8 percent after the student leaves school. The third-best deal is unsubsidized Staffords, which charge interest immediately but don't send bills until six months after the student leaves school. Parents can borrow at rates capped at 8.5 percent from the PLUS program. Higher-income parents who have equity in their home may find, however, that the tax benefits make taking out a second mortgage less costly than PLUS loans.

While a school's preferred-lender lists are a good place to start shopping for an educational loan, the best deals are often found elsewhere. If your school allows you to shop (only about 20 percent of schools borrow directly from the federal government and thus don't let students or parents shop around), check out nonprofit lenders such as MOHELA, NHHEAF, or All Student Loan. Depending on where you live and study, one of these may knock as much as 3 percentage points off the interest rate. A list of nonprofit lenders can be found at www.efc.org/cs/benefits.
Websites such as http://www.simpletuition.com/home have lists of other lenders and loan offers.

When shopping for the best deal, check the terms and fine print carefully. Many lenders attach so many strings that most borrowers never actually receive the goodies.

Choose the loan that offers the most and best upfront discounts, such as waiving both origination and default fees, or other immediate discounts. Most of the goodies that are promised several years down the road won't be paid out if the student consolidates loans or gets into any financial trouble after leaving school.