student loan types

Looking for a student loan to cover tuition fees? Federal student loans or Private Student loans?  Do you know that 44.7 million students like you are managing their education expenses with student loans? In the United States alone, student loans have reached $1.68 trillion. On an average, a student is taking a student loan of $37,584.

Before getting a student loan, you need to know about the types of student loans. Not all loans will be suitable for you. You need to analyze which loan is best for you. Which loan is best for you will depend on a number of factors such as your financial needs, year in school and your credit history. Then take the best option.

Types of student loans

There are three types of student loans

  • Federal student loans
  • Private Student loans
  • loan refinancing

Federal loans

Loans approved by the federal government are called federal loans. Congress sets interest rates every year. Federal loans interest rates are much lower than other lenders. Most students try to get federal loans for loan repayment facility and loan forgiveness programs in federal loans.

To get this loan you need to fill out a free application, known as the FAFSA (The Free Application for Federal Student Aid). There you have to submit all the necessary information. Almost everyone can apply for this loan, credit score or co-signer is not a factor here.

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • PLUS Loans

Related Article: How to Get a Student Loan?

Direct Subsidized Loans

Subsidized Loans are given to undergraduate students only. You need to be enrolled in school at least half-time. You must demonstrate financial need.

A certain amount of money will be given to you as a loan every year. You can see in the chart how much loan you will get.

federal student loans amount
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Subsidized means U.S. Department of Education will pay the interest of your loan. You do not have to pay subsidized loans as long as you are in school. You will have to repay the subsidized loans from six months after you are admitted to the college. These six months are called grace period.

Subsidized loans are actually a type of investment. The government and the tax payer are spending that money on you for your bright future and to ensure the sustainable development of the country.

Direct Unsubsidized Loans

Unsubsidized federal loans are the second option for student loans. Undergraduate, graduate or professional degree students can apply for unsubsidized loans.

The main difference between subsidized and unsubsidized loans is interest payments. If you take subsidized loans you do not have to pay any interest but you have to pay interest on Unsubsidized Loans.

Like subsidized loans, you have to start repaying the loan with interest six months after you are admitted to the college.

For subsidized loans you need to demonstrate financial need but for unsubsidized loans you do not need to demonstrate financial need.

Related Article: How Does Student Loan Interest Work?

PLUS Loans

This loans are available to both graduate or professional students and parents of dependent undergraduate students. It is another federal government loan program.

However, the interest rate and other fees of direct plus loans are higher than other federal loans.

Plus loans are given in the name of parents, not in the name of students. Parental credit scores are a big factor here.

If they have bad credit history then other requirements must be fulfilled to get the loan. The parents will be responsible for repaying the loan.

After getting the loan, the parents of the student have to start paying the interest of parent plus loans. If your parents want deferment, they will get the opportunity to repay the loan with interest six months after your graduation.

The maximum Plus loan your parents can get from federal government is the cost of attendance (determined by the school) minus any other financial aid received.

Private Student Loans

Those who do not get federal loans are looking for private student loans. Banks , credit unions or state provide these loans. Private student loans are more expensive than federal loans. Their interest rates are much higher than the interest rates on federal debt. You will need credit or cosigner to get this loan.

Private student loan advantage and disadvantage


The Problems you may face if you take private student loans –

  • Here you will not get the benefit of flexible repayment term. You have to repay the loan with interest within the stipulated time. Repayment terms vary from organization to organization.
  • You will not get deferment in private student loans.
  • You will not get loan forgiveness in private student loans like federal loan.

Benefits of private student loans

  • You can get the loan as much as you need.
  • Graduates, undergraduates or any other higher degree holders will get this loan
  • This is an opportunity to cover the tuition fees of international students who are not eligible for federal loans.
  • Medical students who have good credit can get low interest loans.

Related Article How to Manage Student Loan Debt (Step-by-Step-Guide)

Loan refinancing

Those with a good credit history may be able to refinance student loans after graduation. Since your credit is good you will get a loan at a lower rate. Generally, if you have a credit score of 690 or higher, you will get the opportunity of loan refinancing.

Frequently Asked Questions (FAQ) about the types of student loans

What are the differences between federal and private student loans?

 According to

subsidized loan unsubsidized loan private loanWhat is the best type of student loan?

I hope you have a very good idea about student loan after reading the above articles. Now if you want to know the best option for me then I would say subsidized loan is the best. Because you don’t have to pay any interest here. The loan does not require cosigner or credit.

You will get the advantage of flexible repayment schedule. But it all depends on what you need. Although there are many benefits in subsidized loan, the amount of loan is not too much. So if your financial need is high then you have to choose another option.

How to Get a Student Loan without a Cosigner?

Through these options you will get a student loan without a credit check or a cosigner

  • Direct Subsidized Loans.
  • Direct Unsubsidized Loans
  • Direct PLUS Loans.

Why should you take out federal student loans? 

  • The interest rates on federal student loans are fixed and the interest rates are much lower than private loans.
  • You will get flexible repayment plans. If you want deferment due to any problem then you will get it.
  • You do not need a credit score or cosigner to get a federal loan.
  • In direct subsidized federal loans you do not have to pay any interest. U.S. Department of Education will pay this.
  • If you meet certain conditions, you will get loan forgiveness in federal loan.


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