Types Of Student Loans

A student loan is a type of financial aid that pays for college fees and other expenses related to education. The similarity between student loans and other loans is that they need to be repaid with interest. The government student loan, are usually lower in interest than a traditional bank loan.

There are two types of loans for students

1. Federal student loans:

These loans have very favorable and lenient terms. The interest rates are set by the government, so the rates are fixed and very low. The eligibility criteria is not very tough and nearly all students can qualify.

There are different types of federal loans.

a) Stafford

Stafford loans are provided by the Department of Education. They are available for students who submit an FAFSA. There financial need is determined by their school. Stafford loan defined by subsidized and unsubsidized.

The Subsidized Federal Direct Stafford Loan are need-based loans. The special feature of these loans is that the interest does not accrue while the student is in school or during the six-month grace period after leaving college.

The Unsubsidized Federal Direct Stafford Loan is not need-based. The particular feature of this loan is that the students are responsible for all the interest that accrues. The loan accrues not only during the grace period but also while the student is in school.

b) Federal Perkins

This loan is available to students who have special financial needs. Students who have considerable financial needs can qualify for a Federal Perkins Loan. These loans have very low rate of interest (only 5%). Another special feature is that they have a longer grace period. They do not have any fees. Federal Perkins share many of the same features of the Subsidized Stafford.

c) Federal Parent PLUS

These loans are available for the parents of graduating students and dependent students. The amount of the loan can be equal to the full cost of attending the college. The interest rate is fixed at 8.5% and it is charged for the entire period. To qualify parents must have a positive credit history.

2. Private Student Loans

These loans are provided by banks and other financial institutions. Usually they are designed to support educational expenses. There are many banks, companies and financial institutes that provide these loans. The loans are only provided to students who have a positive credit history. The rate of interest varies depending on several factors.

* Those who have a good credit history and a good credit score.

* Those who opt for automatic debit payments.

* Those who have a a co-signer for the student loan

Category: Articles