Student Loans Overview
Understanding Federal and private, or alternative student loans will help you decide which is right for you, or if both are needed. To help, this page reviews the basic types of student loans and how you can qualify for them.
- Federal student loans are issued by the government. There are eligibility requirements and borrowing limits for every loan (explained below). To apply for federal loans, you will need to submit the Free Application for Federal Student Aid (FAFSA). Types of federal loans include Stafford, Perkins and PLUS.
- Alternative student loans (also known as "private loans") are issued by non-Federal organizations, such as state or local agencies, private lenders, and private non-profit and for-profit agencies. Any student can apply for a private student loan, regardless of their financial need. Private loans will require credit checks.
Types of Federal Student Loans
According to the Department of Education, undergraduate and graduate students with “exceptional” financial need can borrow a Perkins Loan with a 5% interest rate. Undergraduates can borrow up to $5,500 each year, and a total of $27,500 during their course of study. Graduates can borrow up to $8,000 per year, and a total of $60,000 during their course of study.
The Department of Education offers Direct Stafford Loans to students at Title IV schools. Based on the student’s Free Application for Federal Student Aid (FAFSA), the government creates a Student Aid Report for the student’s desired school(s). This report will indicate how much can be borrowed by the student.
There are two fundamental types of Stafford student loans, subsidized and unsubsidized.
- Direct Subsidized loans. Interest is not charged to the students if they’re enrolled at least half-time, or during their grace and deferment periods.
- Direct Unsubsidized loans. Interest is charged on the day the loan is paid. Students have the option of paying the interest during school, grace periods, deferment periods and forbearance periods. The further a student delays paying interest, the more it will increase the amount owed.
PLUS loans have fixed interest rates of 7.9% and are available to parents or graduate/professional students. PLUS loans can cover up to 100% of a student's Cost of Attendance, including tuition, room and board, and fees. Below is an overview of both the Parent and Graduate PLUS loans:
- Parent PLUS Loans are taken out by parents on behalf of a dependent undergraduate child and can cover up to the cost of attendance. There is a modest credit check required and the repayment responsibility is solely on the parent who received the loan.
- Graduate PLUS Loans are available to graduate and professional students to cover up to the cost of attendance. Unlike the Parent PLUS Loan, the Grad. PLUS is in the name of the student
Both students and parents may apply for a PLUS loan with the help of a cosigner if the applicant has an adverse credit history.
Alternative Student Loans
When Federal aid isn’t enough to fully cover a student’s educational and living expenses, an alternative loan can be obtained as supplemental coverage.
These student loans offer:
- Competitive interest rates
- Rolling applications – There are no deadlines, and students can apply for a loan at any point during the year.
- Loan versatility – a student can request a loan increase at any time during the year. This may be necessary when a student has unexpected additional expenses.
Note: students are more likely to receive loan approval with a Cosigner.
Compare student loan lenders to find a plan that works for you.
State Agency Loans
Each state has education programs that offer financial aid, grants, scholarships and career opportunities to students seeking higher education. Find and contact your state’s education agency to see if you’re eligible for these opportunities. Some examples of agencies that run these student loan programs are: