You’ve filed FAFSA®, applied for scholarships, and now you’re searching for more money til fill the gap financial aid won’t cover.
That’s a stressful task. But luckily, we’re here to make it easier.
Below you’ll find an easy to follow breakdown of the most common loans students get to pay for college.
Federal Loans (also known as Stafford Loans)
Federal loans are the most popular low-interest student loans, which means they are also the first type of loan you should explore.
These loans are insured by the federal government and have the added benefit of not requiring a credit check for approval.
Subsidized Federal Loans
Subsidized federal loans are only available to undergraduate students who demonstrate financial need.To get one, filing your FAFSA® is a must!
One great aspect of this type of loan is that it locks you into a low, fixed interest rate of 5.5%. Additionally, this loan offers flexible repayment plans, and no payments made while you’re still in school. Another perk of subsidized federal loans is the government will pay (or subsidize) the loan interest while you’re still in school.
Unsubsidized Federal Loans
Unsubsidized federal loans are very similar to subsidized student loans, with a few key differences. The first being this loan is available to undergraduate and graduate students.
Also, although filing FAFSA® is still required, you don’t have to demonstrate financial need. With this loan, although it does offer flexible repayment plans and a lower interest rate of 6.6%, interest starts to accrue upon disbursement, and it’s best to start paying off that interest while still in school.
PLUS Loans (also known as Direct Loans)
Offered by the US Department of Education, PLUS loans offer fixed interest rates of 7.6%. To qualify, they do require that FAFSA® is filed and perform a credit check.
Parent PLUS Loan
For undergraduate students, this loan must be taken out by their biological or adoptive
parents and has a fixed interest rate of 7.6%. Parents must also be legal citizens or permanent residents. And lastly, male students must register with Selective Service.
What makes this loan different from other types is the parent is responsible for repaying the loan, not the student. Keep in mind that repayment begins no later than 60-days after loan disbursement unless the parent is enrolled in college at least half-time (6 credit hours).
Direct PLUS Loan
Only available for graduate or professional degree programs, this loan comes with a fixed interest rate of 7.6%.
Since this loan does require a credit check, sometimes a cosigner is necessary for approval. One of the benefits of a Direct PLUS Loan is that repayments don’t begin until 6-months after you graduate or leave school for any other reason.
Private Loans (also known as Personal Loans)
Private loans are available to both undergraduate and graduate students. When looking into taking out a Private Loan, you must shop around because they can range in interest from 5%-36% depending on your credit score. You can find these loans through online vendors, banks, and credit unions.
Although filing FAFSA® is always suggested, it’s unnecessary for Private Loans. Another thing to keep in mind when thinking about accepting a Private Loan is that repayment can start immediately. Every lender is different, so it’s best to ask questions and make sure you’re getting the best deal.