Federal and private loans are the two main types of student loans. Federal loans include Stafford, Plus, and Perkins loans, each with different requirements and interest rates. Private loans are an option if you don’t qualify for federal loans.
There are many types of student loans to choose from, and it’s important to find one that’s right for your unique situation. The two main types of loans are federal loans and private loans.
There are three main types of federal loans:
Federal Stafford Loans: Awarded based on financial need 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:
Federal Subsidized Stafford Loan: This loan is long-term and needs-based with a low interest rate. The term “subsidized” means that the government will pay the interest on the loan while a student is in school or when the student requests a grace period or deferment.
Unsubsidized Stafford Loan: This loan is long-term, not need-based, and has a low interest rate. This type of loan is best for students who don’t qualify for other types of financial aid, or who still need more money in addition to other forms of financial aid. Almost all household income qualifies, and “unsubsidized” means the interest on the loan is the responsibility of the borrower. In some cases, however, payments can be postponed.
Additional Unsubsidized Stafford Loan: These loans are reserved for borrowers classified as independent students, as determined by federal guidelines.
Federal Plus Loans
These loans are available to parents whose children are attending college as full-time or part-time college students. Awarded based on credit history and cost of attendance. The interest on this type of loan is low, but repayment usually begins within 60-90 days after the loan is fully disbursed, or after the student graduates.
Federal Perkins Loans –
Perkins loans are made to students based on dire financial need, and they typically have very low interest rates. However, the total funds available to disburse for these loans is limited, which means that the loan amount will likely be relatively small. Interest does not begin to accrue until 9 months after a student falls below half-time enrollment or graduates.
If you’re not sure if you qualify for a Perkins Loan, talk to 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 fall behind on payments or default on your loan, it could hurt your credit.
If you don’t qualify for federal loans, then you might consider looking at private lenders. Banks and loan companies often make 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 you sign on the dotted line.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
