Types of Student Loans (US)

Student Loans:

There are three different types of student loans: subsidized, unsubsidized, and Perkins loans.

Perkins loans are only available to students who display exceptional financial need. These loans are available at a 5% interest rate and are available to both graduate and undergraduate students. Perkins loans are extended through the university you attend and will be repaid to the university unlike the other types of student loans, which are repaid to the lending agency.

Subsidized student loans are loans in which the interest is deferred until graduation or you cease to be a qualifying student.  What this means is that while you are responsible for repaying the loan upon graduation the interest on these loans does not begin to accrue until your begin repayment 6 months after graduation or your cease to be at least a half time student of the university.

You must qualify based on your income in order to receive a subsidized student loan. While the needs requirements for these loans isn't as grave as those required in order to receive a Perkins loan you must still qualify.

Unsubsidized student loans do not require qualification on a needs basis. You must be a student and enrolled at least half time in order to receive an unsubsidized student loan. The good news however for those who do not qualify based on needs for other student loan options is that this type of loan is available to all qualifying students regardless of need. The interest on these loans however begins to accrue immediately, which means they can really add up over time.

PLUS loans are loans that are taken out by the parents of students who need the funds in order to cover educational expenses. The maximum amount that can be borrowed is the cost of attendance minus any financial aid awards the student has already received. The repayment on these loans begins 60 days after the loan is dispersed and the repayment period can be up to 10 years.

In order to cover the costs involved in education that go above and beyond what the government recognizes as acceptable college related expenses you can opt to go the route of private student loans rather than relying solely upon federal financial aid for your student loan source.

These loans require that you qualify in order to receive them based on your credit rather than your need and must be used for educational purposes only. With these particular loans you really need to make sure you read all the fine print as different companies offer different conditions and different perks.

You should really take the time and compare prices and options before taking out a private student loan and this should be done only as a last resort.

Student loans for many can be the difference in attending college and getting the education you are hoping for and not being able to pay the high costs that go along with higher education. For this reason you should treat them with respect and not take them lightly.