Choosing Between College Students Loans

Financing a college education often requires funding from sources like grants and loans. While grants are certainly helpful because they never need to be repaid, they usually do not cover the all the costs of getting a degree. The leftover cost can be paid through college students loans, which are either federal or private. Sometimes borrowers obtain more than one loan because of restrictions and specifications on the different types of loans. Understanding the differences between loans can help you make the right choice.


Private loans can be used for anything the student needs including housing, transportation and textbooks. One example of a popular private loan is the Signature Loan from Sallie Mae. This loan requires the borrower meet certain credit criteria. If they don't qualify they will need a cosigner (such as a parent) with good credit. After 24 payments a request to remove the cosigner can be made. This loan allows you to borrow the full cost of college attendance. Sallie Mae also has a Community College Loan for half-time university or full-time community college students.

The U.S. Department of Education provides a variety of federal student loans. Stafford Loans feature low interest rates and are the most frequently used type of student loan. They are available in subsidized and unsubsidized versions based on student need. With a subsidized loan, the federal government pays the interest while the student is in school or on a deferral plan. With an unsubsidized loan, the borrower is responsible for the interest. Another student loan is the Perkins Loan, for students with a high level of financial need. Perkins Loans are limited in amount, so other sources of funding will most likely need to be used with this type of federal loan.

Yet another type of college students loans offered by the federal government are Parent PLUS Loans. These loans are provided to the parents of undergraduates so they can fund their child's college education. There is a credit check required to obtain this loan. The repayment options are flexible and the interest on this type of loan could be tax-deductible. Parents of independent students do not qualify for the Parent PLUS Loan. For assistance with choosing loans, consult with a college financial advisor who can tell you which loans best suit your needs.



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