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Types Of Student Loans

Article on Types Of Student Loans

Many students who wish to pursue a college degree require financial assistance because of the high costs of college tuition. While a lot of parents save up for it, when the time comes to send their child to a university or college, they often realize that the money that they’ve set aside is still not enough to cover all the expenses until such time their son or daughter graduates. This article will talk about the two types of student loans that have helped countless undergraduate and graduate students in the country attain higher education.

Federal Loans

This is the most predominant between the two types of student loans. Federal loans can be obtained through the Department of Education’s FDLP, or Federal Direct Lending Program. Currently, the federal loans are: Stafford, Perkins, and PLUS Loans. Stafford Loans can be availed whether or not the student is having financial difficulties. Perkins Loans are designed only for those who really do not have the means to pay for college. And the PLUS Loans can be availed by the students or the parents to cover any amount not covered by other loan programs.

Private Loans

Private student loans are usually availed by those who did not qualify for federal loans. In addition, students who were able to get any of the abovementioned federal programs but found out that the approved amount is not enough to cover the entire cost also resort to private loans for help. This loan type is available through banks such as Citibank and the Bank of America, as well as private lending firms such as Nellie Mae and Sallie Mae. Of the two types of student loans, private loans are less strict in their eligibility criteria however they may require a credit check or a co-signer to be approved for a loan.

Which One is Better?

The answer would basically depend on the situation that the loan applicant is in. For example, if the student is not eligible for a federal loan, the answer to his or her problem would be to apply for a private student loan. It is important to take note though that both types of student loans have their own benefits. Federal loans often have lower and fixed interest rates, and there are even special benefits including income-based repayment. Private student loans, on the other hand, give students the benefit of higher loan amounts and longer payment terms.

Are you having a hard time deciding on which of the two types of student loans to choose? Students often apply for a federal loan first and then use a private loan to get the money needed to pay for what is not covered by the former. Just be sure to borrow only what is necessary and not use any portion of it for other things. Moreover, when applying for a private loan, it helps to research on the lenders who are willing to give you a loan, to ensure that you find the best offers.