Types of Student Loans

Student loans can come from both federal and private sources and in both cases they come in several varieties. The different kinds of student loans have different terms, interest rates and rules for when and how they start accruing interest and must be paid back.

Federal Student Loans

Federal Student Loans are the primary source of loans for students and nearly all students are eligible for some amount of funding through loans from the federal government. Federal loans usually have a more favorable interest rate than private loans and are available regardless of credit score. Federal loans also have a grace period after graduation before you have to start paying them. Here are the types of Federal loans available:

• Stafford Loans: These low interest fixed rate loans are the most common type Federal student loans. They are subsidized loans, meaning that you must demonstrate financial need to qualify. They have a six month grace period after graduation before students have to start paying them back.
• Perkins Loans: Similar to the Stafford loan, but with a longer grace period, this type of loan is distributed at the discretion of accredited educational institutions who receive a specific amount of funding to use for these loans.
• Parent PLUS Loans: Parent PLUS loans are available to parents of undergraduate students. They are low interest loans and can cover the cost of a students education entirely.
• Graduate PLUS Loans: These are loans specifically for graduate students and may also cover the entire cost of tuition.

Private Student Loans

Private student loans can help cover any amount of tuition or expenses that your Federal student loans did not cover. From lender to lender the details and terms can vary greatly, but there are a few types of standard private loans available:

• Sallie Mae Smart Option Student Loan: This type of loan requires interest only payments while still in school with payments on the balance of the loan after the student graduates. Paying the interest reduces the amount of time that will be required afterward to pay the balance of the loan back.
• Signature Student Loan: Signature Student loans like the Federal Stafford loan and include the six month grace period after graduation before the loan must be paid back.
• Continuing education loans: These loans are targeted toward students continuing their education without seeking a degree or going part time to finish their degree. Depending on choice and lender, these may also have an interest only options available.

If you are planning on eventually refinancing or consolidating your loans you should know that Federal and Private loans cannot be combined when consolidated and while most loans are variable loans, some are fixed and you may not want to include those in a consolidation. Consider carefully the immediate impact of terms and conditions of loans, as well as the long term impact on student loan refinancing.