There are many types of student loans to choose from and it is important to find one that is right for your specific situation. The two main types of loans are federal loans and private loans.
There are three main types of federal loans:
Students must apply for loans before starting classes.
Federal Stafford Loans – These are granted on a financial need basis and regulated by the federal government. They can be obtained from a bank, credit union or directly from the government. There are three types of Federal Stafford Loans to choose from:
Federally Funded Stafford Loan – This loan is long-term and needs-based with a low interest rate. The term “subsidized” means that the government will pay interest on the loan while the student is in school or when the student requests a grace period or deferment.
Repayment of student loans usually begins shortly after graduation.
Unsubsidized Stafford Loan – This loan is long-term, non-needs-based and has a low interest rate. This type of loan is best for students who do not qualify for other types of financial aid or who still need more money in addition to other forms of financial aid. Almost all household incomes are eligible and “non-subsidized” means that the interest on the loan is the borrower’s responsibility. In some cases, however, payments may be delayed.
Additional Unsubsidized Stafford Loan – These loans are reserved for borrowers classified as self-employed students as determined by federal guidelines.
A Federal Plus loan is granted to a person based on their credit history.
Federal Plus Loans – These loans are available to parents whose children are attending college as full-time or part-time undergraduates. They are awarded based on credit history and cost of care. Interest is low on this type of loan, but repayment usually begins within 60-90 days after the loan is fully disbursed, or after the student graduates.
Student loans can cover the cost of needed supplies.
Perkins Federal Loans – Perkins loans are given to students based on extreme financial need and generally have very low interest rates. The amount of funds available to be disbursed for these loans is limited, however, meaning that the loan amount is likely to be relatively low. Interest does not begin to accrue until 9 months after the student falls below part-time enrollment or graduates. If you’re not sure whether you qualify for a Perkins Loan, ask a college financial aid advisor. One important thing to note about these loans: they are reported to a credit bureau, which means that if you are late on payments or default on your loan, it could damage your credit.
If you don’t qualify for federal loans, consider seeking out private lenders. Banks and credit companies often offer student loans at relatively low interest rates. Every institution is different, so be sure to check the terms and conditions of any loan you get, federal or private, and make sure you know the details before signing on the dotted line.