There are a lot of options for students who need loans to attend college. The most important thing is that they find the student loans that are right for them and their unique situation. By knowing what is available, students can make the right choice for their needs. After you've determined which type of loan is right for you, check out our reviews of the best student loan providers to find out where to look.
There are two types of student loans federal and private loans. Federal loans are loans given by the government in order to help students attend college. The three major types of federal loans include the Stafford Loan, the Federal Perkins Loan and the Federal Plus loan. There are a few differences between these loans.
Federal Stafford loans can be obtained from the government directly, or a financial institution. A subsidized federal Stafford loan provides long term money based on the individual's need. There is usually a very low interest rate and the government pays that while the student is attending school. With an unsubsidized Federal Stafford loan, students who can't receive other types of loans benefit, as most individuals qualify. Additional unsubsidized Stafford loans help independent students.
Federal Plus loans are based on the individual's credit score, and are usually low-interest loans. Typically, the repayment period starts a lot sooner than it does with the Federal Stafford loan, or as soon as the student graduates.
Federal Perkins loans are usually reserved for low income families with great need and the interest rates are quite low. These loans do have the ability to damage an individual's credit if they're not paid.
Private loans are loans that individuals take out through their banks or credit unions. These are not government-related, and usually require the student to have some credit history or a co-signer. They usually come with a much higher interest rate than federal loans, although the limits on the loan itself aren't as strict. This means that students can often receive more money with a private loan, but they will pay much more back.
Private loans are really not a good idea unless the student is unable to qualify at all for any federal loan which is highly unlikely. The reason is that a private loan will not only end up on the student's credit report if he or she is late or can't pay but there is a lot more at risk. Co-signers could get stuck with the payments or students wages could be garnished as the lender takes back the money he or she lent. It's important to seriously consider one's choices before signing any papers or accepting any loans.
Speaking to a high school guidance counselor can help a great deal when it comes to finding financing for college. They even have applications which can help the student receive free money from the government that they can use to attend school. Grants and other programs allow students to attend college without paying back a single dime. There are many options, so students should consider them all before taking out any kind of loan.