Understanding Student Loans
Student loans are financial aids provided to students to help them cover the costs of their education. There are two main types of student loans: federal loans and private loans.
Federal student loans are offered by the US government, and they are generally more affordable and flexible than private loans. There are three types of federal loans: Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans.
Direct Subsidized Loans are available to undergraduate students who demonstrate financial need. The government pays the interest on these loans while the student is in school and during the grace period.
Direct Unsubsidized Loans are available to undergraduate and graduate students, regardless of financial need. The student is responsible for paying the interest on these loans while in school and during the grace period.
Direct PLUS Loans are available to graduate or professional students and parents of dependent undergraduate students. These loans require a credit check, and the borrower is responsible for paying the interest on these loans.
Private student loans are offered by banks, credit unions, and other financial institutions. These loans are generally more expensive and less flexible than federal loans. Private loans have higher interest rates, and borrowers may need a co-signer to qualify for a loan. Private loans also have fewer repayment options than federal loans.
Examples of private student loan lenders include Sallie Mae, Discover, and Wells Fargo.
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