student loan advice | How many kinds of federal student loans are there?

How many kinds of federal student loans are there?

How many kinds of federal student loans are there?


Harriet J. asks: How many kinds of federal student loans are there? I know about the Perkins Student Loan, Stafford and Grad PLUS Loans but I’m not sure about others. I also know you can get private student loans from different lenders. Also, I need to know when to apply for the student loans?

Student Loan Guru: There are many types of student loans to choose from. It’s important to find one that is right for your specific circumstance. It’s not a good idea to apply for them all. You may not qualify for all of them and it could hurt your chances of qualifying for others. The two main types of loans, federal assisted loans and private loans.

Generally speaking, there are 3 main types of loans to finance your education.

The federal plus loan is available to parents of children who attend college part or full time. These are qualified by checking the credit history of the borrower and the cost of the education. The interest rates on these type of loans is very favorable with many parents. But beware, repayment generally begins around 2 to 3 months after the graduate has graduated or all the funds have been issued.

Federal Stafford loans are based on financial need. These can be applied for at a bank or credit union or directly from the U.S. Government. Keep in mind that there are 3 types of Federal Stafford Loans. The subsidized Stafford loan, the unsubsidized Stafford loan and additional unsubsidized Stafford loans.

The unsubsidized staffor loan is a long term student loan. It is not need based and is generally a good fit for students who do not qualify for other type of financial aid. It is also designed for students who have some financial aid but need more.

The subsisidized staffordloan is also a longer term student loan with lower interest. These are awarded based on the need of the student.

Additional unsubsidized loans are generally reserved for students who a catorigized as independent students. This is based off of Federal Guidelines.

Federal Perkins loans are awarded on the financial need of the borrower. This type of loan is generally a small amount and many students find that it does not meet all their financial need. Some end up seeking other sources of financial aid or drop out of school. The nice thing about the Federal Perkins loan is that interest does not start accruing until 9 months after the Student falls below the half-time student guidelines or graduates.

Just keep in mind that all these loans are reported to the credit reporting agencies. Should you fall behind or stop paying, it will affect your credit on down the road.

What’s the difference between Subsidized and Unsubsized student loans?

Briefly, a subsidized student loan is one that the U.S. Government will make interest payments on until the student graduates, request a grace period or ask for a deferment.

An unsubsidized student loan is one where the borrower is responsible for the interest payments. It’s not uncommon though for the lenders to postpone payment. This is something you should look into before applying.

To apply for these student loans, you should start the federal loan process now by filling out your FAFSA. This is a government process that reviews your financial information and decides how much federal money you’re eligible for. While you’re doing that, start looking around and applying for scholarships, and saving as much money as you can. After you know how much money you’re eligible for via FAFSA, contact your school’s financial aid office and see what private student loans they recommend.

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