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Types of Student Loans
These include government funded, government guaranteed, and private
institution loans that must be repaid.
Federal Perkins Loans. These are a special class of federal loans
designed to help students with extreme financial need. These are subsidized
5% fixed interest-rate loans (no interest accumulates on the loan while
students are enrolled in college). Up to $5,500 per year can
be borrowed and depend on colleges' available loan pools. There are
no origination fees and you have up to 10 years to repay the loan.
Repayment begins 9 months after the enrolled student graduates or drops
to less than half-time.
Federal Stafford Loans. These are loans from
the federal government or are guaranteed by the federal government.
They are fixed interest-rate loans: 6.0% for the subsidized loans and 6.8% for the unsubsidized loans. There is an origination fee
of up to 2% and you have up to 10 years to repay the loan. Repayment
of loans begins 6 months after the enrolled student graduates, withdraws
from school, drops to less than half-time, or fails to make academic
progress. Stafford loans can be either subsidized (need-based loans
in which the government pays the interest on the loan while students
are enrolled in college) or unsubsidized (non-need based loans in which
students pay all the interest on the loan). You may be eligible for
both subsidized and unsubsidized loans. Maximum loan amounts for each
Stafford loan type is as follows:
Freshman year - $5,500. (total of both subsidized
and unsubsidized Stafford loans).
Sophomore year - $6,500.
Junior & Senior years - $7,500 (each year).
PLUS Loans (Parent Loans for
Undergraduate Students). These loans
are provided to parents with good credit histories to pay education
expenses of dependent undergraduate students. These are non-need based
loans parents can borrow to pay the cost of college attendance minus
any other financial aid you receive. These are fixed interest-rate loans: 7.90% for Direct Loans and 8.50% for FFEL Loans. There also is a 3% origination fee and 1% insurance premium. You
have up to 10 years to repay the loan. Repayment of PLUS loans
begin 60 days after the money is borrowed or you can wait until 6 months
after the student completes their college degree or drops to less than
a half-time student.
Private Education/Alternative Education Loans. Students can borrow
money from private banks and lenders to help pay for college expenses. Terms
of private education/alternative education loans depend on the lending
institution. Loan variables, such as interest rates, fees and
loan limits depend on the credit history of the borrower (and co-signer)
and on loan options chosen by the borrower (such as in-school deferment
and repayment schedule). Loan terms also vary by the total amount
of money borrowed.
Private education loans usually cost more than federal government education
loans, but are less expensive than credit card debt. Also, federal
education loans offer better forgiveness and repayment options. Because
federal education loans are less expensive and offer better terms than
private student loans, it is recommended that you deplete your eligibility
for federal student loans before resorting to private student loans.
A comparison of the Private Education/Alternative Education Loans is
provided by a Loan
Summary Table.
Institutional Loans (from colleges
and universities). Some colleges
and universities have funds to offer as loans. Terms of these
loans depend on the college or university. |
