What are the Different Types of Student Loans?

It isn’t enough to just say that we need to make plans for a student loan. While it’s always a good idea to consider financial help to pay for education, parents and students should learn as much as they can about the many different loan programs available. Some of them will work well with one family and student but won’t be the correct choice for others.

The two major categories of student loans are private loans and federal government loans. The difference between these two categories is obvious. Parents and students can work with a private bank or other lender to get money for college or trade school. The guidelines and requirements will not be the same as with federal loans, in most cases.

Federal loans come in distinct types. Stafford Loans are made to families and students that show real financial need. Rules for use of Stafford Loans are set by federal law. The money can be loaned through a bank or credit union, in addition to getting funds from the government itself. The subsidized Stafford Loan is called that because the federal government pays the interest while the student is in school. If a Stafford Loan is not subsidized, loan interest must be paid by the person or persons who borrow the money. It’s easier to qualify for the unsubsidized type of Stafford Loan. The other type of Stafford Loan is also unsubsidized and is reserved for a small category of students.

The federal Perkins Loans are reserved for students who show financial need that is beyond the norm. In these extreme cases, students get smaller loans because the total amount of funds is limited. In addition, the low interest rate doesn’t apply until the student graduates or is no longer classified as at least a half-time student.

Parents of college students may be able to acquire a Federal Plus Loan. General guidelines for these loans include actual cost of going to a particular school and credit history of the parents. Parents and students have to start repaying on this loan sooner than with some other loan types.

In the United States, a student may qualify for a federal loan only if he or she has graduated from high school or has the General Education Development (GED) certificate. In addition, the student must be in an accredited college or school and must be in a degree or certificate program.

Some local banks and other lending institutions will work with parents or students to provide tuition money. Some of these loans have specific guidelines similar to federal government loans. Others are personal loans based on family assets and income, the student’s future earning potential and so on. No matter what kind of loan you seek to pay for higher education, the FAFSA application will be crucial. These initials stand for Free Application for Federal Student Aid. The form is required for federal financial assistance, including Stafford Loans. This application form shows household financial information and helps determine how much the family will contribute in relation to loan amounts.