Most students have trouble paying for college even after receiving scholarships and grants. So where do they have left to turn? Loans.
There are really only two-types of loans, with unlimited amount of different sub-categories for each. The two main types are private and federal student loans.
Federal student loans are only determined after filling out a FAFSA (Free Application for Federal Student Aid).
After filling out a FAFSA form students may be eligible for grants, loans or work-study programs.
Federal loans are only based on the level of financial need for the student, not on the basis of the student’s credit ratings, as private loans are.
If granted a federal loan, students may receive a Stafford or Perkins loan. These two loans are commonly known as having the highest borrowing limits and lowest interest rates of all the loans between Federal and Private.
Stafford loans are either subsidized or unsubsidized, meaning students make payments on their loans as soon as the loans are used, like a car payment, or after graduation.
Perkins loans have low interest rates and are automatically subsidized. Perkins loans also only require payment nine months after graduation.
Even with these loans, some students may require additional funding for school through private student loans.
Private student loans are loans generally granted by banks, credit unions or other financial institutions.
Private student loans also have higher interest rates than federal student loans. Some are subsidized and have a 3-6 month grace period after graduation, but most of them are unsubsidized and payment is due when first-used.
Private loans also have certain limitations. Some require full-time student declaration. Usually these loans are the highest borrowing limits and lower interest rates.
Others only require part-time student status and have lower borrowing rates and higher interest rates. Also, these loans hardly ever have fixed interest rates, and are subject to fluctuation.
And other loans are only available to students who go to private college institutions and not available for students who go to regular universities or community colleges.
There are so many variations within this category of student loans it would be impossible to go into detail about all of them.
A financial advisor, or a bank representative can answer more questions about private student loans.