Types of Student Loans
There are primarily two categories of student loans:
- Federal Student Loans:
- Direct Subsidized Loans: Available to undergraduate students who demonstrate financial need. The government pays the interest while the student is in school and for six months after graduation.
- Direct Unsubsidized Loans: Offered to undergraduate and graduate students regardless of financial need. Interest accrues during school and is added to the loan balance upon repayment.
- Direct PLUS Loans: For graduate or professional students and parents of dependent undergraduates, these loans cover costs not met by other financial aid.
- Direct Consolidation Loans: Allow borrowers to combine multiple federal loans into one, simplifying repayment.
- Private Student Loans:
- Offered by banks, credit unions, and other financial institutions, private loans usually have higher interest rates and less flexible repayment options compared to federal loans. Eligibility often depends on creditworthiness.