Student Federal and Private Loan Guide
There are two general types of student loans - Federal and Private.
Federal Student Loans
Federal student loans are the largest and most economical sources of student education
loans. These loans are guaranteed by the US Department of Education and they therefore
have more favorable terms than private loans. As a result, you should investigate
as many federal loans as possible before you look into private loans.
The main types of Federal Student loans are as follows:
Federal Stafford loans - Available to almost all students regardless
of credit history. Stafford loans can be subsidized by the US Department of Education
or unsubsidized depending on the student's financial condition. The 2007 loan limit per
year is $3,500 for freshman, $4,500 for sophomores and $5,500 for juniors and seniors.
Students have a six month grace period after graduation before they have to start
making payments.
Federal Perkins loans - A low (5%) interest loan for students selected
by financial need. Each school receives a limited amount of funding for Perkins
loans so those with the greatest need will receive them first. The 2007 loan limit
per year is $4,000 for undergraduate students. Perkins loans are similar to Stafford
subsidized loans except they have no fees and a longer grace period.
Federal Parent PLUS loans - Considerably higher loan limits than
Stafford or Perkins loans but has a higher interest rate, are not subsidized, and
the obligation to repay is taken by the parent, rather than the student.
Private student loans
Private loans can bridge the gap between what federal loans provide and the actual
tuition cost. Private loans are available from school themselves or from 3rd party
private financial institutions. Private loans are credit-based loans available to
students for tuition and fees, room and board, supplies, computers and other every
day education related expenses. Depending on the lender, private loan terms can
vary considerably based on individual credit history so they one should shop around
for the best rates and terms.