7 Different Types of College Loans for Students

There are two major types of college loans for students: federal and private student loans.

These loans pave the way for Americans who struggle to pay for college.

However, there are several other options for borrowers. We will help you find what’s best for you in this article.

(Bonus Tip: Are you a recent graduate with a hefty handful of loans? If so, you are probably wondering what the next best step is for managing them after graduation. Not a worry! Skip the confusion and check out this super-equipped Graduate’s Guide To Student Loans and find out how you can easily understand your finances, repayment, and ways to manage life after college, here.)

College Loans for Students | Federal vs. Private

1. Direct Subsidized Loans
2. Direct Unsubsidized Loans
3. Direct Consolidation Loans
4. Direct PLUS Loans
5. Parent PLUS Loans
6. In-school Loans
7. Refinanced Loans

Federal

1. Direct Subsidized Loans

As the term suggests, money comes directly from the federal government. This program is called the FDLP, short for Federal Direct Student Loan Program. It’s also known as a subsidized Stafford loan.

For direct subsidized federal loans, the Department of Education covers accrued interest on your loans. That will be the case only if you are enrolled in school for at least half-time.

Only eligible undergraduate students can avail of this program. If you want to apply, you should be able to demonstrate a financial need to be accepted. Your school will decide the amount you can borrow in your college award letter.

Interest Rate: 

• Undergraduates – 3.76%
• Post-graduates – 5.31% (for disbursed loans beginning July 1, 2016, to July 1, 2017 only)

Maximum Loan to Borrow:

• Undergraduates – $5,500 to $12,500
• Post-graduates – $20,500

Terms: 10 to 25 years

2. Direct Unsubsidized Loans

Almost everyone can get accepted for a direct unsubsidized federal loan. Unlike a subsidized federal loan, this is available for both graduate and professional students. And granting the loan is not dependent on financial need.

For these type of loan, you have a fixed interest rate that is based on yearly market rates. The interest starts adding up on the day you receive the loan. If unpaid, the interest is added to the original loan amount.

Interest Rate: 

• Undergraduates – 3.76%
• Post-graduates – 5.31% (for disbursed loans beginning July 1, 2016, to July 1, 2017)

Maximum Loan to Borrow:

• Undergraduates – $5,500 to $12,500
• Post-graduates – $20,500

Terms: 10 to 25 years

3. Direct Consolidation Loans

Consolidating your federal loans lets you merge all your student debt through one loan servicer. This means you only have to worry about a single pay every month.

You can also have the repayment period extended for up to 20 years. This can keep your monthly payments lower than your past loans. Keep in mind that a longer term can also be a disadvantage. That’s 20 years more before you can attain full financial freedom.

Interest Rate: Depends on the weighted average of your existing loan’s interest rates

Terms: 20 to 30 years

4. Direct PLUS Loans

All PLUS loans (either for students or for parents) borrowers will have to go through a credit check, especially for Direct PLUS loans. An endorser or a cosigner can definitely help you if you want to qualify for a PLUS loan. The endorser should have good credit to do so.

With a Direct PLUS loan, you can have up to six months after graduation or leaving school to start your payments.

Interest Rate: 6.31% (for disbursed loans beginning July 1, 2016, to July 1, 2017)

Maximum Loan to Borrow: Depends on the cost of attendance less the financial aid

Terms: 10 to 25 years

5. Parent PLUS Loans

Parent PLUS loans are for biological, adoptive parents, and stepparents. The parents are responsible for their children’s student loans while they’re still in school.

A Parent PLUS loan is not transferable from the parents to their children. However, several private lenders let you do that by refinancing the loan and turning it over to your child’s name.

Interest Rate: 6.31% (for disbursed loans beginning July 1, 2016, to July 1, 2017)

Maximum Loan to Borrow: Depends on the cost of attendance less the financial aid

Terms: 10 to 25 years

Private

6. In-school Loans

Student private loans are becoming more popular with both students parents. This is because of the many loans to choose from. This means more options and terms that will suit your preferences.

You can also choose between fixed and variable rates and decide the length of the repayment term. It’s important to do your research before choosing a private lending company. Check the reviews and ask for family and friends’ recommendations before signing the dotted line.

7. Refinanced Loans

Private lending companies allow borrowers to refinance both federal and private loans into a single loan. However, consolidating federal loans do not guarantee savings. In fact, it can even cost more because it stretches your repayment term.

By refinancing, you can get a lower interest rate plus savings from the total cost of your debt. To qualify for the lowest possible interest rates, a solid credit score plus a consistent income will definitely help.

Watch the clip from How to Adult below to learn more about college loans for students:

There are different types of college loans for students. Since we all have different financial situations, there is no perfect student loan for everybody. Before you apply for one, it is always best to do a little research. And consult a financial professional along the way.

(Pro Tip: Are you looking for a one-stop shop that covers all the basic elements of
student loans? We’ve got you covered! From the breakdown of common terms, to understanding your own personal loans, the 2018 Grad’s Guide To Student Loans will explain everything that you need to know in the most simple way possible. Click to get your free guide, here.)

Now that you know different types of college loans for students, what’s the best one for you? Let us know in the comments below!

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