What are the Different Types of Student Loans for College?

Josie Myers
Josie Myers
A student loan and financial aid application.
A student loan and financial aid application.

Those seeking student loans for college have two basic options, federal or private loans. Federal loans are guaranteed by the federal government, and therefore generally offer the best interest rates and repayment options. Private loans are granted by private banks, and usually have a bit higher interest rates than federal loans. They are popular, however, for providing additional funds when federal loan limits are reached.

There are four types of federal student loans for college. Stafford loans are the most popular, followed by Perkins, and two types of PLUS loans. Each has have their own purpose.

A student loan application form.
A student loan application form.

Stafford loans offer a low, fixed interest rate for undergraduate students. The school being attended must be accredited, and the student must be enrolled at least half time. There are limits to the amount that can be borrowed, raging from $5,500 US Dollars (USD) for first year dependent students to $20,500 USD for independent graduate students.

Federal Perkins loans are very low interest student loans intended for students with financial difficulties defined as "exceptional." Students must apply for the loans with special documentation for their personal or family financial difficulties. Yearly loan limits range from $3,500 USD for first year student to $8,500 USD for graduate students.

Federal and private loans are the most common types of loans for college.
Federal and private loans are the most common types of loans for college.

PLUS loans were originally called Parent Loan for Undergraduate Students, but have since dropped that name. These loans are low interest loans taken out by parents for their dependent students to cover additional educational costs above those covered by the Stafford and Perkins loans. The loans are able to fund the entire cost of education beyond what the other types of loans will cover. Graduate PLUS loans are taken out by a graduate student to pay for their own education in a similar manner.

Many students find the financial demands of college challenging.
Many students find the financial demands of college challenging.

Private Loans are another option for those seeking student loans for college. These loans are also sometimes called alternative student loans, or personal student loans. The interest rates of these loans, while usually higher than a federal loan, are generally lower than other lines of credit issued by private banks. Some students choose these types of loans to pay for books and other similar expenses associated with school.

Repayment begins six months after graduation on most student loans for college. For those who are having difficulty finding gainful employment, there are options like forbearance or deferment that can put off payments. Many find it helpful to consolidate their loans into one lump sum, since it can lower the interest rate, and extend the repayment terms of the loan in many cases.

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Discussion Comments

beachgirl05

allienoelle- All Stafford student loans are either subsidized or unsubsidized.

Subsidized means that the government pays the interest of the loan while you are in school.

Unsubsidized means that you must pay the interest, but you can choose to defer interest payments until after you graduate if you wish.

Keep in mind that to be eligible to receive a subsidized loan, you must demonstrate considerable financial need. To determine financial need, you must fill out a FAFSA -- Free Application for Federal Student Aid.

allienoelle

What is the difference between a subsidized and an unsubsidized Stafford student loan?

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