What Are My College Loan Options?

College is expensive, period.  Even if you select the least expensive college in the nation, those costs will surely add up over a 4-5 year period.  Those students who do not qualify for grant programs or scholarships can find themselves drowning in debt after graduation if they are not careful.

For some parents, the problem is that they just make too much money to qualify for free federal financial aid.  Since most financial aid is need-based, this leaves a lot of students left with college loans as their only option.

There are various different types of student loans.  With the rising costs associated with attending college and the growing need for a college degree in order to be successful in this country, more and more students are forced to more closely review their college loan options.

What Are The Most Common Types of Student Loans?

There are 3 types of loans that college students typically take out.  They include the following:

1. Federal Student Loans

2. Federal Plus Loans

3. Private Student Loans

Each of these loans has their own individual advantages and disadvantages.  Below, I will summarize each of these types of loans and explain who can benefit from them.

1. Federal Student Loans

There are 3 types of Federal Student Loans:

A. Perkins Loans

B. Subsidized Student Loans

C. Unsubsidized Student Loans

Perkins Loans – Students can only qualify for this loan if they display exceptional financial need.  These loans are available to both graduate and undergraduate students.  Perkins loans are given through the college or university you will be attending.  Unlike other types of student loans, they will be repaid directly to the university.

Subsidized Student Loans – Students qualify for these types of loans based on financial need.  The requirements aren’t as stringent as the Perkins loans process, but you still must qualify. The interest on these loans is deferred (or postponed) until after you graduate.  What this means is that even though you are responsible for repaying this loan 6 months after graduation, the interest attached on these loans does not begin to accrue (or accumulate) until after that 6 month point.

Unsubsidized Student Loans – Any student can qualify for these types of loans.  The only requirements are that you must be a student and enrolled at least part-time.  The interest on these loans accrues (or accumulates) immediately, which means that the total loan value could really add up over time.

2. Federal PLUS Loans

Federal PLUS loans are loans that are taken out by parents to cover their child’s educational expenses.  The maximum amount that any parent can borrow is the cost of attendance, minus any financial aid that the student has already received.  The repayment period for these loans starts 60 days after the funds have been dispersed to the school and the repayment period can be up to 10 years.

3. Private Student Loans

Some students opt to go with private loans, rather than Federal student loans.  Your qualification for these types of loans is based on your credit score.  These loans must also be used for educational purposes only.  If you do decide to go with private loans, please READ THE FINE PRINT…every company has different loan terms and conditions.  Take your time to evaluate a lot of different companies and compare prices before taking out a private loan.  These types of loans should only be done as a LAST RESORT.

Taking out student loans is a serious matter, so you should not take them lightly.  Take your time to thoroughly research all of your options before making a final decision.

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Lauren Anderson is a certified school counselor who's passionate about helping students all over the world successfully transition from high school to college! After spending 6 years as a business professional, she obtained her Master’s degree in School Counseling and now spends her spare time helping students.

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