Types of College Loans
Many students will find that they will need to take a college loan so that they are able to go to college. Loans will need to be repaid and also have an interest attached to them. The interest is the fee that you are charged for borrowing the money.
Private organizations, colleges, state governments and federal governments provide college loans to students and parents. Here is an overview on the type of college loans that are available.
Need Based Loans
- The federal Perkins loans are awarded by colleges to students that display the highest need
- Federal direct subsidized loans have a borrowing limit attached to them which increases each year of school that you complete.
Non Need Based Loans
- Federal direct unsubsidized loans will allow you to add the interest fees to the amount you borrowed up until after graduation. This though means you will owe more.
- Federal parent PLUS loans will allow parents to borrow the total cost of college minus any financial aid they received.
State loans are also available but these are not need based or subsidized.
Private loans are generally not subsidized or need based. Private loans will also require a parent to commit to repay the money if the student fails to. The interest rate on a private loan will vary.
Banks and other financial institutions will usually have the highest interest rate. There are some private organizations and foundations that will offer lower interest rates. You are also able to get a private loan from colleges that will offer lower rates then federal loans.
The federal government offers loans that are need based like the Perkins Loan and Direct Subsidized Loans to students that are unable to pay for college. These loans present themselves as the best option because:
- The loan is subsidized by the government
- Lower interest rates
- You are able to defer paying any money until you have finished your schooling
- You do not need to provide a credit check.
If you qualify for this type of loan then it is a good idea that you choose them first.