What is a Student Loan?
Student loans are loans offered to students pursuing a postsecondary education and must be repaid. The federal government usually issues student loans at a lower interest rate than private loans. Students may finance their education through private lenders; however, the interest rate is much higher and you may not be able to defer payments until after you finish college.
Federal Perkins Loan – This is a low interest, long-term loan made to the student based on financial need. The student must be enrolled and attending full time and the maximum loan amount is $4,000 (undergraduate) or $6,000 (graduate) per year.
Federal Stafford Loan - This loan is also made to the student, and the student must be enrolled and attending at least half time. There are two types of Stafford loans:
- Subsidized – If you meet the need-based requirements, you may be eligible for a subsidized Stafford loan. This means that as long as you are enrolled and attending half time or more, you will not be responsible for the interest while in school and the principle is deferred.
- Unsubsidized – If you do not show a financial need for the loan, you can receive an unsubsidized Stafford loan for which you are responsible for paying the interest, but the principle is deferred. You may choose to defer the interest as well, but you will ultimately be responsible for paying it.
Federal Parent PLUS Loan – This loan is available to the parents of dependent students who are enrolled and attending at least half time. The parent does not have to demonstrate a financial need. Like the unsubsidized Stafford loan, the parent will be responsible for paying the interest throughout the life of the loan. A parent may borrow up to the total cost of school less any other financial aid received.
Federal Graduate PLUS Loan – This loan is just like the Parent PLUS loan except that it is in the student’s name.
Private/Alternative Loan – After federal student aid options have been exhausted, a student may want to contact a private lender. A private lender is not associated with the federal government or any educational institution. Approval of this time of loan is not guaranteed, and the interest rate, which could be variable, is based on credit.
