There are a number of different types of student loans. They are all created to help students and parents discover the right choice for their respective situation. The overall cost of both private and public colleges are steadily increasing and students need to find the means for funding their education.
Deciding which student loan, whether a private or federal student loan, is a very important decision. You will eventually be responsible for paying it back, so research all of your options.
What is a Student Loan?
Student loans are educational loans from a lender that are used to pay for tuition and other expenses needed for college. These loans can be for undergraduate degrees, graduate degrees, and specialist programs, such as medical or law school.
The premise behind a student loan is the student loan repayment must start, with interest, to the lender within a certain time frame after graduation. A student loan is a means of helping to pay for the rising tuition fees, and can also be used to purchase computers, books and other educational materials needed by the student.
Types of Student Loans
There are three main types of student loans available, a federal student loan, a private student loan or a parent loan. Two of the most common federal loans used by students are Stafford loans and Perkins loans. What is beneficial behind a federal student loan is that federal laws regulate the interest rates charged for these programs.
A lender has to offer a federal loan at the specified interest rate, which is usually lower than the national interest rate. A federal student loan can also be consolidated after the student graduates, allowing the student loan repayment plan to fall under one large umbrella.
Private student loans are separate from federal loans, and students applying for these don’t have to fill out federal forms. Private lenders offer these loans, making them cost more because there is no legal requirement to stay within a certain interest rate.
Private loans also require a student to submit their credit history, and the interest and fees paid on the student loans are based upon the student’s credit score. Parents may be required to co-sign for a private student loan, making them responsible if the student has to defer payments at any time.
A parent loan, or the Parent Loan for Undergraduate Students (PLUS), is a type of student loan parents apply for to encompass any additional cost their child’s financial aid or student loans won’t cover. PLUS loans, like other federal loans, come with a fixed interest rate.
These loans can also be consolidated, like the Stafford and Perkins loans, and parents are fully responsible for repaying PLUS loans to the lender after they are disbursed.
It is now easier than ever to find the right student loans as you begin to prepare for your collegiate education. You have a number of options, so taking the time to research all of them will benefit you.
Your collegiate financial advisor will provide you with a great deal of advice and direction. The good news is that a student loan will enable you to follow your dreams of pursuing a higher education.