A Guide to Student Loans: Federal and Private Loans

There are several different student loan options available for people who need more funds for their education than they can receive through federal grants and scholarships. There are a few different varieties of federal loans as well as private loans.

The Federal Perkins Loan

Federal Perkins loans are issued by the school you are enrolled with. The college is the lender, and you will pay the college back. Interest is 5-percent. The loan is offered based on a student's need and is valued at up to $5,000 for an undergraduate and $8,000 for a graduate student.

Direct Subsidized Stafford Loans

With the direct subsidized Stafford loan, the student is borrowing money from the federal government. Interest is not charged to the borrower during college and grace or deferred periods. Interest on the loan is 4.5-percent for undergraduate students and 6.8-percent for graduate students. If you are a student enrolled for at least half-time and can demonstrate financial need, you can receive between $3,500 and $8,500 depending on your grade level.

Direct Unsubsidized Stafford Loans

The direct unsubsidized Stafford loans carries 6.8-interest across the board and has a value of between $5,500 and $20,500. Any subsidized Stafford Loan awarded is subtracted from the maximum unsubsidized loan you are eligible for. The student must pay all interest on the loan.

Direct PLUS Loans

PLUS loans can be awarded to both parents of students and graduate or professional students. The maximum amount awarded is the total tuition for college minus the total of other financial aid the student receives. With PLUS loans, the student or parents must not have a negative credit history and the graduate or professional student seeking a loan alone must have applied for all other federal loans up to maximum eligibility.

Private Loans

Outside of the federal loans mentioned above, there are also private funding options available to students. The government highly recommends that all federal loan options be exhausted prior to applying for a private loan as federal loans offer better interest rates and greater flexibility for the student. Private loans can also carry a necessary credit check and loan fees that federal loans do not. It is important to be especially wary of private loans that try to associate themselves with the federal government as many companies that employ such tactics are data collection scams.

When you have exhausted grant and scholarship options for funding your college education, there are multiple options for federal loans and private loans to carry you through until graduation.

Sources:

"Federal Student Aid Loan Programs Fact Sheet." StudentAid.gov.