Types of Student Loans

The first place to start when looking for education loans is to understand the types of student loans. They fall into three main categories, federal loans, private loans, and consolidation loans. Federal loans are usually the first type of loans that students think of. These are the Stafford Loans, Perkins Loans, and PLUS loans. Each of these loans are subsidized by the government, but actually taken out through financial institutions that are not related to the government.

Stafford and Perkins loans are the most commonly applied for loans for undergraduates. They are usually considered to give applicants fairly low interest rates on student loans. The interest on student loans is set by the government and is controlled by the current economy. The Stafford loan currently has a 6.9% interest rate, and the Perkins loan is lower, at 5%. The Perkins loan is one of the types of graduate student loans that are out there, but you must be able to show that you have significant financial need to qualify.

PLUS loans for students are designed for graduate students who cannot apply for any other type of financial aid because they have used their options completely. Private student loans are those offered by private institutions, such as a company or a school. Often students who do not qualify for federal aid can get a loan through a private program. A common type of private loan is a work study program for students, especially grad students. This gives the student a low interest rate on the loan in return for working for the college, university, or company.

Since private loans are offered by many different institutions, it is hard to say what the interest rate is on each loan. The best tip to finding a fair loan rate on a private loan is to advise you to shop around for the lowest interest rate on private student loans that you qualify for. This is probably going to be the best loan for you!

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