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Federal Loans

Your eligibility for federal student loans is determined by the results of your Free Application for Federal Student Aid, or FAFSA. Federal loans may be subsidized or unsubsidized based on student need. Take advantage of federal loans if you are eligible because they have lower interest rates than private loans and the conditions are more flexible.

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  • Direct Loans

    Direct Loans, sometimes known as Stafford Loans, are the most popular college loans. They are available to undergraduate, graduate and professional students. Subsidized Direct Loans are need-based loans and Unsubsidized Direct Loans are awarded based on the cost of attendance and financial aid already awarded. Unsubsidized loans are not based on income. The amount you can borrow depends on your chosen institution, your year in school and whether you have a Subsidized or Unsubsidized Direct Loan.
  • PLUS Loans

    Federal Parent Loan for Undergraduate Students Loans, or PLUS Loans, are available to graduate students and parents of dependent undergraduate students. Parents can only take out one PLUS Loan for their children during the same enrollment period. To be eligible for either version, signers have to have decent credit. PLUS Loans for graduate students also require that the student borrower has already applied for their maximum federal loan amount. PLUS college loans are more expensive than Direct Loans, but they have a higher borrowing limit.
  • Perkins Loans

    Federal Perkins Loans were low-interest loans for undergraduate and graduate students with high financial need. As of September 30, 2017, schools can no longer make new Perkins Loans.

Private Student Loans

Private student loans are also called alternative loans, because they are an alternative to federal loans. While federal loans have more flexibility and lower interest rates, they have tighter borrowing caps. Private lenders have more borrowing options for students who still need money. There are a lot of lenders, each with different rules, rates, fees and benefits. Do your research to find the best lender. Contact your college’s financial aid office for a list of top lenders.

Private loan rates fluctuate with the economy and vary from lender to lender. Each student lender sets their own interest rates and chooses their own benefits. Private lenders offer more money than federal loans. Most private loans calculate their number similar to federal loans, where the borrowing limit equals the cost of attendance minus other financial aid. Private lenders, however, usually require students to start paying immediately after the first disbursement. Investigate your private student loan options closely to make sure you are getting the best rate possible. Remember to always read the fine print.

Student Loan Consolidation

Consolidating loans can simplify your student loan repayment process because they combine several payments into one. Interest rates on consolidated loans are often lower than loans that are not consolidated. Federal loans can be consolidated during repayment, grace periods, deferment, and forbearance. Loans cannot be consolidated while the borrower is still in school. The consolidation rate is fixed for the life of the loan, which protects the borrower from possible rate increases but does not allow them to benefit from possible decreases. There are no application fees or prepayment penalties. Still, investigate your options carefully to not lose out on borrower benefits.

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Last Reviewed: January 2021