Your student aid package will include grants, scholarships, and other aid that you do not have to pay back, but loans will be a part as well. You have to pay loans back (with interest), so it's important that you select the best one for your situation.
As of July 1, 2010, federal loans are available only through the Federal Direct Loan Program (FDLP), in which the lender is the U.S. Department of Education. If you have federal loans disbursed prior to July 1, 2010, you may have gotten them through the Federal Family Education Loan Program (FFELP), in which you could select your lender.
There are several types of FDLP loans available:
- Direct Stafford loans for students
- Direct PLUS loans for graduate students and for parents
- Perkins loans for students with extreme financial need (as defined by the school)
The federal government regulates these loans and controls the interest rates, which are generally lower than those for nonfederal loan programs. The government also sets guidelines surrounding the loan terms. Federal loans can be:
- Subsidized—The government pays the interest for the borrower while in school, in grace, or in deferment.
- Unsubsidized—The borrower is responsible for paying the interest on the loan. If the borrower chooses not to pay while in school, in grace, or in deferment, the interest may be added to the principal balance (through "capitalization").
Alternative (Private) Loans
These loans often have less favorable terms than federal loans do. Consider alternative loans ONLY when you have exhausted all other sources of funding.
Compare Types of Loans
- Applying for a loan is as easy as 1-2-3!
- Subsidized loan amounts are based on financial need. If you don't qualify for a subsidized loan, an unsubsidized loan (available regardless of financial need) is still a better option than an alternative (private) loan.
- Beware of educational loan offers that seem "too good to be true." While you may get the funds easily, you may pay more through high interest rates.