Different types of student loans

Category: Education


Student loans are a popular choice amongst those needing funding for their college tuition, but there are quite a few options to choose from. Student loans fall into two main categories—private loans and federal loans—but it’s not just as simple as picking a federal or private student loan. Here’s how you can decide which type of student loan is best suited for you:

Private loans

Private loans are loans that are available through banks and other financial institutions, and they are not associated with the government. Unlike federal loans, private loans are usually only available to students with credit history. These types of loans can usually provide the student with a large sum of money, but the interest rates are often much higher than government loans. It’s often not recommended for students to apply for private loans because it’s easy to get into a substantial amount of debt that is difficult to pay back. Students should only apply for private student loans if they weren’t able to get enough money through a federal loan; these types of loans are often best reserved as a last resort.

Subsidized federal loans

These are usually the least expensive of all student loans. They come with a lower interest rate and they are subsidized, which means that if the student makes a deferment request or while the student is in school, the government will pay the interest so that it doesn’t accrue. Although these loans can be acquired from credit unions or banks, in addition to the government, the federal government regulates them all. These types of loans are awarded based on financial need.

Unsubsidized federal loans

These loans can be easier for students to obtain when compared to subsidized loans, since they are not based on financial need. Although the interest rate is low, unlike subsidized federal loans, these types of loans will have accruing interest that the student will eventually need to pay back once his or her repayment program begins. Alternatively, borrowers can pay the interest while still in college so that it doesn’t accumulate.


Tags: college expenses, college tuition, Student Loans

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