Interest, simply put, is the fee associated with a loan. In the case of monthly loan payments, the borrower's payment covers two areas: interest and principal.  The principal is the amount borrowed and the interest is determined by the annual rate (APR).    When considering student loan options, borrowers should consider several important factors.  These include loan interest rates, creditworthiness requirements, and lender reputation.  In addition, students should consider repayment plans and honestly assess their earning potential after graduation.