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Student Loans

Going to college debt free is everyone's ideal scenario, but if you have used all scholarships, grants, and any other financial aid options out there, you may still require some money to cover the remaining cost of college. If you need to borrow money for college, you can make the process easier by learning about the different types of student loans available.

Student Loan Basics

A student loan is money you borrow that must be repaid with interest. Student loans are broken into two categories: federal and private. There are four types of Federal Loans available: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans. These loans are made by the federal government and typically have lower interest rates and more flexible repayment options.

Private student loans are borrowed from individual lending agencies, with credit requirements, interest rates, terms, and repayment schedules set by the lenders. Private loans are not guaranteed by the government, and most base eligibiility for loans on the borrower's credit scores. Private loans tend to have higher interest rates, but they can cover more costs than just tuition, like room and board or textbooks.

Here's a quick overview of Direct Subsidized Loans:

  • Available to undergraduate students with financial need.
  • Colleges determine the amount you can borrow.
  • The amount borrowed may not exceed your financial need.
  • The U.S. Department of Education pays the interest on a Direct Subsidized Loan while students are in school at least half-time, for the first six months after you leave school, and during a period of defered loan payment.

Here's a quick overview of Direct Unsubsidized Loans:

  • Available to undergraduate and graduate students.
  • There is no requirement to demonstrate financial need.
  • Colleges determine the amount you can borrow based on your cost of attendance and the other financial aid you receive.
  • You are responsible for making interest payments during all periods, including while you are in school and during grace periods or deferment periods.
  • If you do not pay interest during these periods your interest will accumulate and be added to the principal amount of your loan.

Here's a quick overview of Direct PLUS Loans:

  • Direct PLUS Loans are issued by The U.S. Department of Education.
  • The borrower cannot have an adverse credit history.
  • The maximum loan amount is calculated by the cost of attendance minus other financial aid received.
  • A Direct PLUS Loan is commonly referred to as a parent PLUS loan when made to a parent, and as a grad PLUS loan when made to a graduate or professional student.

Here's a quick overview of Private Student Loans:

  • Private Student Loans are offered by different private lenders.
  • Different lenders have different credit requirements, rates, and repayment schedules.
  • Applications are typically available online, through your lender, or from your school's financial aid office.
  • Many private student loans require payments while you are still in school.
  • You are responsible for making interest payments on private student loans.
  • Private student loans cannot be consolidated into a Direct Consolidation Loan.
  • You may need a cosigner.

Here's a quick overview of Federal Perkins Loans:

  • Federal Perkins Loans were available to undergraduate, graduate, and professional students with exceptional financial need.
  • The authority for schools to make new Federal Perkins Loans ended on Sept. 30, 2017.

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Last Reviewed: June 2020