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Types Of Student Loans - The Facts You Need To Know

Updated on May 6, 2011

How To Qualify For Student Loans

There are many types of student loans available to college students. When you are looking for financial help for college it is very important that you know the lingo behind all the financial aid that is available.

When you start looking for financial aid for college, you start off by filling out a FAFSA application. This is not hard but it may be confusing for someone who has never completed one before. It is a series of questions including personal information, assets, income tax filings, dependents and information about the college of choice. It is extremely important to fill this out correctly as it is the basis of all financial aid you can receive including all the types of student loans. An important tip about FAFSA is that is will NEVER cost you any money to fill out the application. There are some sites that try to imitate it and charge you for filing but the correct link is here:

Financial aid packages include grants, scholarships, and student loans. It does not hurt to apply even if you think you would not qualify. I know many people that thought they would get no financial aid until they applied and received help.

Federal Student Loans

Basically there are two types of student loans: federal and private. Federal student loans are guaranteed by the federal government. Private student loans are funded by private banks or financial institutions.

If you qualify for federal student loans as determined by your FAFSA application, you have several options to choose from including:

  • Stafford Loans: Stafford loans are the most common type of student loans. Stafford loans do not require good credit, do not have to repaid until 6 months after graduation and offer a low interest rate for the lifetime of the loan. The maximum loan amounts are dependent upon which year of college you are in.

    Stafford loans are categorized as unsubsidized and subsidized. An Unsubsidized Stafford Loan is a federally guaranteed student loan that is not based on financial need. Interest will accrue from the time the loan is disbursed to the school and is added to the principal amount of the loan. You do not have to make interest or principal payments until six months after graduation, or six months after you drop below a half time status. A Subsidized Stafford Loan is a federally guaranteed loan that is based on financial need. Interest does not accrue while you are in school at least half time or in a deferment plan. The federal government pays all interest while the student is in school hence the name subsidized.

    Stafford loan repayment plans are designed to provide flexibility and have several options including standard repayment which is a fixed amount each month, graduated repayments which offer lower payments at the beginning of the repayment time, income based repayment depends upon income amount and extended repayment which varies over a period of 25 years for repayment.
  • Perkins Loans: The Perkins student loan option is offered to both non-graduate and graduate students with exceptional financial need. It has a very low interest rate and offers a generous grace period. Perkins loans are given out through the college financial aid office but it is funded through the federal government so it is technically a federal loan.
  • PLUS Loan Programs: The PLUS loan program is available to parents of undergraduate students and graduate students. This loan allows parents or graduate students to fund the entire cost of the education with loans come with a fairly low interest rate. The loan can be for the total amount of a student's education minus the amount of financial aid received.

    PLUS loans aren’t need-based loans, so you can qualify regardless of income and they are available throughout the year. Taking out a PLUS loan is a smart financial decision to help you meet college costs at low interest rates.

Private Student Loans

Private student loans are an option for college students looking to supplement the cost of college and housing. College costs including tuition, books and supplies can be quite pricy and private student loans help.

Private loans vary by lender and interest rates are based on credit worthiness. Cosigners can be used to acquire student loans.

Important Points To Remember About Student Loans

This is a list of things to remember when considering a student loan for college.

  • Be sure to explore all the option for student loans that are available to use.
  • All types of student loans have to be paid back. You cannot file student loan balances under a bankruptcy case.
  • Student loans do appear on your credit report.
  • You can consolidate student loans. Federal student loans would normally have a lower consolidation loan rate than private student loans.
  • Make sure you understand repayment options of all student loans.

Types Of Student Loans
Types Of Student Loans


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    • Simone Smith profile image

      Simone Haruko Smith 7 years ago from San Francisco

      Wow, I hadn't realized there were so many different types of federal student loans. Most interesting! Thanks for creating this overview!