Applying for student loans can be very confusing and difficult. Do you need a subsidized loan or a Perkins loan? A Stafford or a private? Here’s a quick rundown of what the different types of student loans are.
Subsidized Loans: These are a type of Stafford loan and are designed for students who demonstrate financial need. While students are in school, the government pays the interest on these loans.
Unsubsidized Loans: Basically the opposite of Subsidized Loans. Students are responsible for paying the interest on these loans, but they are still Stafford Loans.
Perkins Loans: Another federal loan, but meant for students with great financial need. In these loans, the school is the lender (using federally provided funds) and the government pays the interest on the loan while the student is in school.
PLUS Loans: Get excited for these loans! Parents take out PLUS loans and are responsible for paying for these. They can supplement a student’s aid package. Graduate or professional students are also eligible for a PLUS loan. Unlike student loans, PLUS loans begin repayment 60 days after receipt; there is an option to defer until graduation.
Private Loans: These are loans from private investors, such as banks and credit unions. Private student loans typically have higher interest rates than federal loans. They are becoming harder and harder to gain though, due to the economic recession.
Hopefully this will clarify which loans you should apply for.