Types of Student LoansJuly 20, 2016
For many students, achieving their desired level of higher education requires some type of outside financial assistance. That financial assistance can come in the form of grants or financial loans. Due to the multiple types of loans available, many students opt to accept and welcome the assistance of student loans. According to the most recent data from The Institute for College Access & Success, 71 percent of students graduating from four-year institutions have student loans. The variety of student loan types make the process seem daunting, but educating yourself on the different types of loans will show that it is actually quite simple.
To help you understand more about the world of student loans, we started by highlighting the different types of student loans. Each loan type includes a brief overview, the average interest rates that could be expected (but are subject to change), and the amount of money you may be eligible to receive (also subject to change).
Stafford loans are government-funded, federal loans that are dispersed directly to the student. Stafford loans can be either subsidized or unsubsidized. Subsidized loans will not accrue interest until after you have graduated or withdrawn from school. Unsubsidized loans will begin to accrue interest at a fixed rate as soon as they are dispersed, all the way until the loan is paid off.
Like Stafford loans, Perkins loans are also government-funded, federal loans. However, they are all subsidized. Perkins loans are not as easily attained as Stafford loans. Due to the low-interest rate and subsidized nature of the Perkins loans, they are reserved for students who demonstrate “exceptional financial need.” The Federal Government allocates a limited amount of funds to each school. Once the funds are allocated the school determines which candidates will receive the loan.
PLUS stands for Parent Loans for Undergraduate Students, but they are available to both parents and graduate students. PLUS loans have a fixed rate. Parent Plus loans are for parents with children in undergraduate school, while Grad Plus loans are available to graduate students. PLUS loans are federally-funded, but they have no maximum amount. PLUS loans can be used to cover additional costs not covered by other forms of financial aid.
Health Profession Loans
Health professional student loans are specialized loans reserved for students studying in certain medical programs. Programs under this designation include the schools of dentistry, optometry, pharmacy, podiatric medicine, and veterinary medicine. The loan types vary in requirements and interest rates but are guaranteed low-rate loans.
Private Education Loans
Private education loans are usually targeted at students and parents who have any additional, leftover education costs after they have obtained federal loans. Unlike federal loans, private loans are provided by private institutions and lenders. Similar to a personal loan, private loan rates are based on a borrower’s financial profile and credit score. As a result, these loans can be harder to obtain and typically have higher interest rates than federal loans.
Now that you know a little more about the major types of student loans, the average interest rate, and the loan amount you may receive, you can go forth with confidence into the realm of student loans.