TYPES OF STUDENT LOANS
There are several different types of student loans to choose from, and some have better repayment options than others. Your choices include:
- Federal Family Education Loan Program (FFEL) — provided by private lenders, including banks and credit unions, and are guaranteed by the Federal Government.
- Federal Direct Student Loan Program (FDSL) — funded directly by the U.S. government.
- Stafford Loans — subsidized or unsubsidized loans with low interest rates. If you’re not eligible for a loan from a private lender and can demonstrate financial need, this is the loan for you. (Note: with a subsidized loan, the government pays the interest on the loan while a student is in school).
- PLUS Loans — low-interest loans that parents can apply for on behalf of dependent undergraduate students.
- Perkins Loans — a type of federal loan that is designed to assist students who have an extreme financial need. These are subsidized loans and have very low interest rates.
- Consolidation Loans — these will combine existing loans into one loan so that you can lower your monthly payment and if you choose to, have your payback period extended.
- Private or alternative loans — student loans issued by private banks and lenders. These can help to cover college expenses that are beyond the government loan limit.
A word to the wise: You should always seek federal loans before trying to get a private loan.
Federal loans have better loan forgiveness options, and better alternatives if you run into financial trouble and need to get a loan forbearance or deferral. Additionally, federal loans charge lower interest rates and fees, and provide greater flexibility in repayment options.