Are you initiating the process of figuring out how you would pay for college? Financial aid is the best choice as it will help you in achieving your education dreams, but that is a complex process having a growing variety of student loan options from which you have to choose.

Assume that you’ve searched out all opportunities for scholarships and grants, not the next option in front of you is to research student loans.

General categories of Students Loans

There are two general categories of Students Loans

1. federal student loans and
2. private student loans.

Federal Students Loans

The best choice for students are federal student loans. These loans are backed by the U.S. government and they are available directly through your school or through banks and student loan lenders through the Federal Family Education Loan Program (FFELP).

Benefits of Federal Students Loans

These loans comes with lower interest rates, multiple repayment options, longer repayment periods, and much easier credit requirements as compared to private loans.

What to do to get federal student loan?

In order to receive a federal student loan, it is necessary for you to complete and submit the FAFSA, the Free Application for Federal Student Aid. For getting any help with this form, visit FAFSAonline.com.

Forms of Federal Students Loans

There are variety of Federal student loans, from need-based aid to loans that are targeted to parents. These forms are:

• Perkins Loans
• Stafford Loans
• Plus Loans

Perkins Loan

A very low fixed rate of 5%  is offered by the Perkins Loan to undergraduate and graduate students who demonstrate financial need.

Undergraduates can borrow up to $4,000 and graduate students up to $6,000, but that all depends on the level of need. Unlike other federal loans, the funds are dispersed to the students from the school and the student are not required to be enrolled at least half-time to be eligible.

Stafford Loan

The Stafford Loan is the most common federal student loan, it is due to the reason that it is not necessary to demonstrate financial need so anyone can apply. These loans comes with fixed interest rate and they have two forms:

1. subsidized and
2. unsubsidized.

On subsidized Stafford Loans the interest is paid by the government while the student is in school; whereas on unsubsidized Stafford Loans the student pays the interest but they can defer making any payments until graduation. It is the requirement of all Stafford Loans that the student has to be enrolled at least half-time. Depending on year, students are allowed to borrow between $2,625 (freshmen) and $5,500 (senior) a year.

PLUS Loan

The Parent Loan for Undergraduate Students (PLUS) are those federal students loans that are targeted to parents of dependent undergraduate students who are enrolled at least half-time. Although for these loans there is not a full-scale credit check, but the applicant must not have any adverse credit experiences on their record (e.g., bankruptcy, default).

Parents are allowed to borrow up to the student’s cost of attendance less any other aid the student has received. A fixed interest rate is carried by these loans that is higher than the rate for Stafford Loans, and repayment starts while the student is in school.

Private (or Alternative) Loans

As I have already mentioned before that before turning to private student loan, you have to try your best to get federal loans. But usually federal loans often do not fully cover the cost of tuition.

So for that reason the market for private loans has been growing dramatically in order to help fill the gap between rapidly rising tuition costs and funding from federal Stafford loans.

Pros and Cons of Private Students Loans

There are a few pros and cons that you need to consider before applying for private loans.

Pros:

• Students are allowed to borrow up to 100% of the cost of education
• Borrower benefits are offered by many that can reduce the interest rate
• If your school certifies enrollment and the check is sent directly to the school then Lower rates may be available
• Students can use the Funds for tuition, room and board, books, or a computer
• There is no need to complete the FAFSA

Cons:

• These loans lenders conducts credit check, by which your approval as well as your interest rate is determined (using a co-signer significantly increases your chances of approval)
• The interest rate is variable and it may increase over the life of the loan
• Deferment option  might not be included in Private student loans

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