Federal And Private Loans for Students

When a student or a students parents wants to obtain a loan for financing university study, there are many different sources they can go to for the funding. However, there are two totally different categories of loans, these are federal loans or private loans.

With respect to federal funding for college, it’s often much easier to get the financing when the applicants circumstances match the criteria defined for a federal type loan.

A popular federal student loan is the Stafford loan of which there are two different types, a subsidized Stafford Loan and an unsubsidized Stafford Loan.

Subsidized Stafford Loans are only awarded to graduate students based on their financial need. There is no interest paid before repayments begin or during periods of deferment. The federal government “subsidizes” any interest due during these times.

Unsubsidized Stafford loans can be awarded to anyone and any eligible graduate can be awarded the loan. The main benefit being that the loan is fixed at a relatively low rate (as is the subsidized version). But for the unsubsidized version interest is charged from the outset, i.e. as soon as the loan is awarded, and continues to the time the loan is repaid in full.

Another low interest government loan is the Federal Perkins loan available through participating schools and they are awarded to undergraduate or graduate students that have a need for financial assistance. It’s worth noting however that there are limited funds and these are awarded through participating schools until all the funds available have been allocated. After which even students that meet the eligibility criteria will no longer be able to secure a loan via the scheme.

The Perkins loan has a maximum loan amount of $4k per year and $20k total per undergraduate student and $6k per year with $40k total for graduate students. As previously stated this is a low interest loan and similar to the subsidized Stafford loan, interest is paid for by the federal government while you are still studying and during any deferment periods.

These and other loan types can all be inquired about at your chosen faculty or university.

There are also many private lenders keen to provide assistance for school funding. But, if you decide to take the private lender route for obtaining a student loan, be aware that most will want some sort of a credit score history from the potential borrower and will almost certainly require a co-signature on the loan if the student in question does not have a credit score history when applying for finance.

Before committing to a specific loan, especially from a private lender, it is a good idea to look at all the options available with the intention to evaluate interest rates, charges, and any other additional costs. These student loans will be with you for a while after you have finished studying, and some will require repayments to start immediately. Other repayment schedules may be deferred for a period dependent on the loan type and lender. So it might be a good idea to get all this information before making any rash decisions about your college student loan.