There are different kinds of loans you can get to help pay for college at both the graduate and undergraduate level. They can generally be divided into three categories: Federal Loans, Institutional Loans, and Private Loans. Each has pros and cons worth taking into consideration, and a mix is usually employed to help students pay for college.
Federal Loans are some of the most widely used because of their low-interest rates and sensitivity to financial needs. Subsidized and unsubsidized Stafford loans and Direct PLUS loans are all granted by the federal government. Forgiveness on these loans is not commonly given.
Institutional Loans are given to students by their colleges and universities. In most instances, these are variable rate loans that change with market fluctuations. They also require a co-signer for the student to obtain the loan.
Private Loans are offered by banks and credit unions. The interest rates on these are sometimes comparable to federal rates, although your credit history plays a huge role. Interest rates on these loans are either fixed or variable.
Although some loans do have fixed interest rates (such as the Perkins Loan), most rates will change annually depending on the market. This is where federal and institutional loans stand for the current 2017-2018 year:
Federal & Institutional Loan Programs:
|Unsubsidized Stafford Loans|
All prospective students are eligible for this type of loan through FAFSA
|Payments begin as soon as loans are taken out|
|Subsidized Stafford Loans|
Students must demonstrate financial need to be eligible for this loan. It is available through FAFSA
|Interest is paid by the government during attendance and 6 months after graduation, then student payments begin|
|Direct PLUS Loans|
The federal student loan is given to parents of dependent students.
|Payments begin once the loan is taken out but can be deferred until graduation|
Loans are given by Colleges and Universities to enrolled and prospective students
|Depends on the specific loan|
With so many interest rates and student loan options, choosing the right package can be confusing and difficult. But knowing the ins and out of these interest rates can better prepare you to choose the one that works best. The key to college finances is preparation and planning, and a well-diversified financial aid portfolio. These are just some of the many options you have for student aid.