Types of Student Loans
When it comes to funding your education, there are three types of student loans available to almost every student. You just have to figure out the one that works best for you.
The three basic types of student loans are Stafford and Perkins loans, Parent Loans (PLUS loans), and Private Student Loans (Alternative Student Loans). Each type of loan comes with positive aspects and negative aspects, and it is important that every student understand each loan type. While most students never take a crash course in student loans, you can be assured that reading this article will help you to make the right decision.
The first type of student loan that nearly every student applies for is a Stafford or Perkins loan. These loans are government funded, and they tend to have low interest rates. Students do not have to pass credit check in order to obtain these loans, but these loans are often not nearly enough to cover the cost of living and tuition expenses. Stafford loans include the Federal Family Education Loan Program (FFELP), and the Federal Direct Student Loan Program (FDSLP).
FFELP loans are backed by private lenders (usually banks and credit unions), and FDSLP loans are given to students directly from the government. All types of governmental loans are either subsidized (you do not pay interest while you are in school), or unsubsidized (you pay the interest, though you can defer payment). While government loans can be very useful, the other types of student loans (Parent and Private) can get a bit tricky.
Parent loans are loans that parents can apply for in order to provide extra funding for their dependant child. The interest rate for a Parent loan is fixed at 8.5% (after July 2006), but the interest on this type of loan is not subsidized while a child is in school. Most lenders offer the same rates for Parent loans, and repayment begins only 60 days after the funds are dispersed. The last type of loan, Private, is very different from both federal and parental loans.
In order to obtain a Private loan, you will have to seek out a private loan lender. Most students can find this information if they ask their loan officer, and private loans can really help to bridge the gap between governmental loans and all those expenses that you will have to pay. Private lenders offer different rates, so make sure to shop around. The types of student loans offered to America’s students are easy to understand, and most of the time loans help students obtain a worthwhile education.
