College Loans

Understanding the various types of student loans available is just the first step for financing your education. The two basic types of loans are federal student loans and private student loans, each with their own distinct characteristics.

Federal Student Loans

Federal student loans are funded by the U.S. Department of Education and offer benefits such as fixed interest rates and flexible repayment plans. To apply, you must complete the Free Application for Federal Student Aid (FAFSA). Below are the four types of federal student loans and a brief breakdown of each.

Direct Subsidized Loans

Direct subsidized loans are available to undergraduate students with demonstrated financial need, these loans do not accrue interest while you're in school at least half-time, during the grace period, or during deferment periods.

Direct Unsubsidized Loans

Direct unsubsidized loans are offered to undergraduate, graduate, and professional students regardless of financial need. Interest accrues during all periods, including while you're in school.

Direct PLUS Loans

These loans are available to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other financial aid. A credit check is required, and, like the Direct Unsubsidized Loan, interest accrues during all periods.

Direct Consolidation Loans

These loans alow you to combine multiple federal student loans into a single loan with a fixed interest rate, simplifying repayment.

Private Student Loans

Private student loans are offered by private lenders such as banks, credit unions, or online lenders. These loans can help bridge the gap between the cost of attendance and other financial aid received. Private student loans will typically have higher interest rates and less flexible repayment options compared to federal loans. Eligibility often depends on your credit history and may require a co-signer. It's essential to research and compare terms, interest rates, and repayment options before choosing a private loan.

Student Loan Consolidation

Consolidation involves combining multiple federal student loans into a single Direct Consolidation Loan, simplifying repayment by having only one monthly payment. The interest rate is a weighted average of the original loans' rates, rounded up to the nearest one-eighth of a percent. While consolidation can lower monthly payments by extending the repayment period, it may result in paying more interest over time. Additionally, certain borrower benefits, such as interest rate discounts or loan cancellation benefits, may be lost.