What kinds of loans can I use to pay for school?

The federal government, state governments, colleges and private organizations all provide college loans to students and parents. Regardless of the type, student loans are different from grants and scholarships because they all have to be paid back.

Federal loans are generally the most secure, and have the lowest interest rates. Some government loans are need-based, and are offered to students based on their FAFSA information.

  • Need-Based Loans
    • Federal Perkins Loans are awarded by colleges to students with the highest need.
    • Federal Direct Subsidized Loans have a borrowing limit that increases for each year of school you complete.
  • Non-Need-Based Loans
    • Federal Direct Unsubsidized Loans allow you to delay the interest fees on the amount you borrowed until after graduation. But this means you’ll actually end up owing more.
    • Federal Parent PLUS Loans allow parents to borrow the total cost of college, minus any financial aid received.
In general, private loans are not subsidized or need-based. They also often require a parent to commit to repay the money, as a co-signer on the loan, if the student fails to. Banks and other financial institutions usually have the highest interest rates.
This special type of loan means the government pays the interest on the loan while you are enrolled in school. Once you are no longer enrolled, the loan will start accruing interest, which you will be responsible for paying, on top of your loan amount.
Unsubsidized loans are traditional loans that begin accumulating interest as soon as you begin receiving them. You are responsible for the original loan amount, as well as the interest that accumulates while you are in school.

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