For millions of people, college is not an option without some sort of financial aid to help pay for the ever-growing, exorbitant cost. Financial aid comes in many forms, including merit and athletic scholarships – which generally do not need to be repaid – and student loans – which do have to be repaid.
There are many types of student loans, including private and federal. And within each group are more subgroups. Different loans are governed by different federal and/or state rules and regulations; and students are often eligible for one or many types of loans. There are also subsidized and unsubsidized loans.
Perkins and Stafford Loans are federal loans funded by the U.S. government that have favorable repayment terms and low interest rates. These loans are given directly to the student and are not dependent upon collateral or a credit check. Federal loans may also be consolidated after graduation.
PLUS loans are also federal loans, originally called Parent Loans for Undergraduate Students. These loans were developed to help parents fund or partially fund their children’s higher education. Currently, parents may obtain PLUS loans; and students seeking graduate degrees can obtain Grad PLUS loans.
In addition to federal student loans, there are many types of private student loans offered by banks and other financial institutions. Private loans generally do not come with the same low interest rates and favorable repayment options found in federal loans. Credit checks and collateral often accompany private loans.