Types of Students Loans: Find Out What Fits You Best

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Female student looking at student loan options on a cellphone

You are ready to take the plunge and to take your education to the next level. Getting your college degree whether it’s a master’s or bachelor’s can be out of reach unless you get Student Loans. Unfortunately, there isn’t a one size fits all for everyone. We break down some types of Student Loans that can help you pay for your college education. You will learn about Federal Student Loans and Private Student Loans and find out which you can qualify for to help you achieve your college goals.

Federal Student Loans

Federal Student Loans are loans backed and given by the government. They are typically loans at a lower interest rate and with more flexible payback terms. Federal Student Loans have terms and conditions that are set by the government. Plus they offer many great benefits including fixed interest rates and income-driven repayment plans.

There are 2 types of Federal Student Loans, Direct Subsidized Loans and Direct Unsubsidized Loans. They are often called Stafford Loans or Stafford Direct Loans.

Direct Subsidized Loans are available to undergraduate students with financial need. In general, they have better terms because they are given to students in financial need.  The school the student is going to determines the amount of the loan and doesn’t go over the student’s financial need.  The great thing about Direct Subsidized Student Loans is that the US Dept of Education actually pays the interest on the loan while you are in school and for 6 months after.

Direct Unsubsidized Student Loans are available to all students and not based on financial need. You must pay all interest rates during the loan, even while you are in school. The amount and terms of Unsubsidized Student Loans are determined by the school the student is attending. The school determines this based on your financial situation and any financial aid received.

Student Loans taken out by Parents

Loans for higher education and college aren’t just for students. Parents can also take out loans on their children’s behalfs as well. The federal government has a loan program just for parents called Direct PLUS Loans, also called parent PLUS or grad PLUS.

Direct PLUS Loans

Direct PLUS Loans are more similar to a private loan than an Unsubsidized Federal Student Loan. In that they require, a credit check, usually have interest rates and fees. These loans should really only be taken out after you have exhausted all other loan options because of the terms.

Private loans

Private bank to get student loan

If you’ve exhausted all your federal student loans, scholarships and grants then look into Private Student Loans. Private Student Loans are similar to Federal Student Loans except that the loan comes from a local or national bank, a credit union, online lender or another financial institution.  The major difference between federal and private loans are that the rates, terms and amount. They vary from one lender to another so you really need to research the best lender for your needs.

Top Private Student Loan lenders

Wells Fargo

A Wells Fargo private student loan can cover up to 100% of eligible college costs, less other aid,  with additional benefits such as:

  • Students make no payments while in school.
  • Discounts to lower your interest rate.
  • Competitive interest rates.
  • No origination or early repayment fees.

Sallie Mae

One of the most recognizable names in student lending, Sallie Mae offers many different loan programs for students, masters and doctoral programs, parents and more.

  • Competitive variable rates.
  • No origination fee and no prepayment penalties.
  • Get a 0.25 percentage point interest rate reduction while enrolled in and making monthly payments by automatic debit.
  • Borrow up to 100% of the school-certified cost of attendance.
  • You may apply to release your cosigner from the loan after you graduate, make 12 on-time principal and interest payments and meet certain credit requirements.
  • Track your credit health with free quarterly FICO Credit Scores available online to you and your cosigner.

Citizen’s Bank

Another very well known lender, Citizen’s Bank offers many different options to help pay for your education. Their easy application makes them a very popular choice.

  • They offer 5, 10 and 15-year terms.
  • No application, origination, or disbursement fees.
  • Low and competitive fixed or variable rates.
  • Discounts up to 0.50 percentage points with available discounts.
  • Deferment options for up to 8 years while you are still in school.
  • You can borrow from $1,000 to $150,000 for your undergraduate degree.

SunTrust Student Loans

A little lesser known but a popular choice for students needing additional loans.

  • 36-month interest-only repayment option.
  • 7, 10, and 15-year loan terms
  • Loan amounts from $1,001 to $150,000
  • 6 month grace period
  • Co-signer release after 36 months of on-time payments

Conclusion

FAFSA in a notebook to apply for Student Loans

There are many types of student loan options to choose from so researching will be the key. Start by filling out the FAFSA form to see what type of financial aid you can qualify for.