Don't get taken when you sign for a college loan. Federal loans are cheaper than ever this year, for both parents and students. But loans directly from banks or other for-profit lenders can trip you up. You might lock yourself into thousands of dollars of unnecessary spending and, potentially, a greater risk of default. Here's where to borrow, with the best options first:

Federal student loans. They now go directly though the colleges, not through banks. For undergraduates who qualify for a federal subsidy, the fixed rate on new Stafford loans dropped to 4.5 percent for 2010-2011, down from 5.6 percent last year. The government pays the interest while you're in school and for the following six months. Unsubsidized Staffords cost 6.8 percent. Both programs charge a 1 percent fee.

Whether you qualify for government aid depends on your income and assets, as reported on the FAFSA -- the federal Free Application for Federal Student Aid. In general, the subsidy goes to families earning up to about $80,000 a year. If the loan amounts aren't enough to cover your costs, look first to programs offered by the states.

State programs. Seventeen states lend money to students who live or will attend college there. Fixed rates range from 6 to 8.19 percent. Variable rates generally range from 1.78 to 3.8 percent, with Iowa and Maine as expensive outliers. Fees run from zero to 5 percent, with Iowa and New York spiking higher.

Go for Stafford loans first. The interest rates are fixed and you get the best repayment terms. States often require co-signers. The variable loans might have no caps, so you don't know what you'll be paying five or 10 years from now. In some states, repayments start while you're still in school. Nevertheless, state programs offer better terms than you'll get from banks.

PLUS loans. If parents can help, the right choice is a federal PLUS loan. You pay a fixed 7.9 percent (last year, some parents paid 8.5 percent), plus a 4 percent fee.

Parents can borrow the entire remaining cost of higher education, provided that they can pass a credit check. That's gotten harder since the recession began. You're disqualified if, among other things, you've gone through foreclosure or bankruptcy within the past five years or are more than 90 days late on repaying any debt. A parent can rescue the loan, however, by finding a co-signer.

Loans from private lenders. If you've run through all the government possibilities, and are still short of cash, look at the loans offered by private lending institutions. You might think that they all cost about the same but that's not true. Rates vary widely. You can save yourself tens of thousands of dollars by investing a couple of hours in comparison shopping.

Tim Ranzetta can prove it. He's the president of Student Loan Analytics, which rates 14 private lenders based on their program's average cost. Last May, he applied online to six lenders as a co-signer on a nephew's loans. He calls his credit score "average." The offers came in at interest rates ranging from 6 percent, at a credit union, to 12.25 percent (plus a 3 percent fee) at Sallie Mae. (Rates on some loans have dropped since May.)

Tim's brother, who has a high credit score, applied as a co-signer, too. The offers he got ranged from 4.25 percent at SunTrust and Discover to 10.125 percent (plus a 3 percent fee) at Citibank. In both cases, loans from the biggest brand names would have cost the family the most.

The only way to discover the lowest available rate is to apply to several lenders at once. Multiple applications won't hurt your credit report. They'll count as a single inquiry as long as you make them all within 30 days.

Private lenders are searching for ways to make their education loans more appealing. For example, Wells Fargo is offering a new loan not only to parents but to other sponsors, such as grandparents. It has no origination fee. Variable rates range from 4.25 percent to 10.74 percent, depending on your credit standing. Parents with top credit will pay less, at the start, than they would for a PLUS. On the other hand, they could pay much more if interest rates rise over the 10- to 15-year repayment period. The PLUS program also offers better choices to borrowers who become financially pinched and need to stretch the payments out.

Some schools provide short lists of preferred private lenders who supposedly provide the best deals. Compare prices anyway. The lists don't necessarily cover lenders with the lowest costs.

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