What are the Different Types of Student Loans?
More College bound students are looking into student loans to help them finance their College Education. There are three types of student loans, the Student Loan, the Parent Loan and the Private Student Loan. The difference in scholarships, grants and loans is that with loans you have to pay them back. Student Loans mostly come from Federal Government Loans such as the Stafford Loan. These loans come in two different sections, the Federal Family Education Loan Program and the Federal Direct Student Loan Program.
The Federal Family Education Loan Programs are basically loans that are given out by private lenders like credit unions and banks. The other, Federal Direct Student Loan Programs are loans that are given by the Direct Lending of Schools. All Stafford Loans are subsidized or unsubsized. You will have to pay back the loan with interest but you can defer the payments until after you graduate. The Stafford Loan has limits one for subsidized loans and the other for unsubsidized. These amounts range in the first year from 5,500, the second year is $ 6,500, third year $ 7,500 and so on. About 2/3 of Stafford Loans are given to families who make under $ 50,000.
The Parent Loans are loans taken out by the parents for their kids. The Federal Parent Loan for Undergraduate Students or PLUS allows the parents to borrow money to cover costs that parents cannot afford to. There are no limits to these types of loans. These loans are offered by private lenders like banks and therefore are subjected to approval with a credit check. Interest on these loans may be high so make sure you get the best rate possible. You want the loans that have a fixed rate of 8.5%, some go about 9%. Repayment on these loans start 60 days after the loan is made. But you have up to 10 years to repay these loans.
Private Loans are also called Alternative Education Loans. These are loans that help close the gap from education and the amount of money that you would get from Government Loans. The eligibility for these loans depend on credit checks. These types of loans have a better payback rate as well as a better interest rate. If students applying for these loans do not have the proper credit then you may need a parent to cosign for you. The amount of the loan is dependant on the credit score and how much you actually need.
Finding these loans can be stressful if you donít know to look. Talk to your Guidance Counselor at school, they always have student loan information available. It is best to plan ahead and gather all of your information necessary before applying for these loans. There are hundreds of different student loans out there and finding the right one can take some time. You want to choose the student loans with a fixed interest rate and a low interest rate as well. Take your time and you will find the right loans.