Types of Student Loans
July 20, 2016Updated December 2, 2021
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, 69% 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, here is a brief overview of the different types of student loans.
Stafford Loans
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 Subsidized loans will not accrue interest until after you have graduated or withdrawn from school.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.
Perkins Loans
Like Stafford loans, Perkins Loans are also government-funded, federal loans. However, they are all subsidized. Perkins Loans are not as easily obtained 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 government allocates a limited amount of funds to each school. Once the funds are allocated, the school determines which candidates will receive Perkins Loans.
PLUS Loans
PLUS stands for Parent Loans for Undergraduate Students, but they are available to both parents and graduate students. PLUS Loans have a fixed interest 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 and allow you to borrow up to the school’s cost of attendance. PLUS loans can be used to cover additional costs not covered by other forms of financial aid.
Health Professional 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 generally low-rate loans.
Private Education Loans
Private student 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 can have higher interest rates than federal loans.
Now that you know a little more about the major types of student loans, you can create a budget for college and determine the right options for funding your education.