Student Loan Basics

If you have decided to get a student loan you have come to the right place. It can be a bit tricky to decide what type of student loan you can get. Do you get a federal or private student loan? What's the difference? What is the better federal student loan for you? It can get confusing.

Federal Student Loans

There are three main types of federal student loans. They are the Perkins Loan, Stafford Loan and the Parent Loan for Undergraduate Students (PLUS).

The Federal Perkins Student Loan is a loan geared towards students who have a financial need. The interest rate is relatively low, around 5%, and it is fixed. Undergraduate students can borrow up to $4,000 and graduate students are allowed to borrow up to $6,000 per year.

The Federal Stafford Student Loan is the most common of the federal student loans. It is open to everyone, not just students demonstrating financial need. The Stafford Loan comes with a fix interest rate and it has two forms: subsidized and unsubsidized. With a subsidized Stafford Loan the government pays the interest for you while you are in school and paying the principal. With an unsubsidized student loan you have to pay both the principal and interest but you do not have to pay anything until you graduate.

The PLUS loan is a loan designed for parents of students. These loans require, although not an actual credit check, that you don't have a bankruptcy or a default on your record. The interest rate is fixed and usually higher then the other two loans and repayment plans start while the student is in school.

Private Student Loans

Private student loans have no government regulation, they do credit checks and you are not required to fill out a FASFA for them. They have more options and can allow you to borrow more money. The interest rate may be higher and you can be turned down based on your credit history. A private student loan is a good option for you if you want to cover all the costs of you or your child's education.