Understanding Student Loan Types
Unless you were fortunate enough to get a bunch of scholarships to pay for school, chances are you’ll be taking out a few loans to pay for your education. But because there are so many available, loans can get confusing. Here is an explanation of all the major loan types. But remember that to even be considered for most of these loans, you will need to first fill out your FASFA form.
There are two different types of loans within the Stafford family: the Federal Family Education Loan (FFEL) or the William D. Ford Federal Direct Loan. These loans are specifically for students. They come in either subsidized or unsubsidized forms, depending on financial need. If a loan is subsidized, it means the government will cover interest costs while a student is enrolled in school and up to six months after they graduate. FFELs are funded by banks and other private lenders whereas direct loans are funded by the government. Whether a student is eligible to receive a direct loan or FFEL is determined solely by the student’s school. Regardless, both loans are about the same and offer the same amount of money. Repayments plans are about the only thing that differs.
On the other hand, PLUS loans are designed for parents and are always unsubsidized. They too can be a direct loan or a FFEL. In order to take out this particular loan, parents must have a good credit history.
Federal Perkins loans are based on financial need and are administered by the schools themselves. It’s important to note that while these loans are available at most schools, not all schools offer them. These loans are available to both undergraduate and graduate students. There is no credit history check and loans are repaid directly to the college.
Finally, if the amount offered from the loans mentioned above do not cover the cost of school, or maybe you need to pay for a study-abroad program, for example, you can get a private loan from your bank. These types of loans will require a credit check and most likely a co-signer. But they are a great alternative if you need additional money to pay for expenses.