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Types of Education Loans for College Students
Whether you're looking to pay for your own college education or that of your child, researching education loans can be frustrating and more than a little intimidating. There are so many different types of education loans available that it can become overwhelming to find just the right loan - or combination of loans - that will cover your needs. Although there are a number of education loans available, there are just four different types of education loans that fund most American students.
Four types of loans
Stafford Loans are the most popular type of education loan. Stafford loans are low interest education loans that are backed by the government, so they don't require collateral. All schools are authorized to accept Stafford loan money, so even if you're considering a trade school, this might be an option for you. There are two types of Stafford Loan - subsidized and unsubsidized. Subsidized Stafford Loans are for students who demonstrate financial need and who qualify to have the government pay for the interest accrued on the loan while the student's in school. Unsubsidized Stafford Loans are for students with that don't qualify based on income to have the government pay for the interest, so the interest payments during school are deferred and added on to the total loan amount. When applying for Stafford Loans, apply for both subsidized and unsubsidized education loans. Keep in mind, though, that the only way to qualify for these kinds of loan programs is through the FAFSA, and it must be filled out early to get the aid you need.
Private Education Loans can be taken out when Stafford Loans don't cover enough of the cost of schooling. You can apply for private education loans to pay for tuition, books, computer equipment, or living expenses. Most private loans are through banks or individual schools.
PLUS Loans can be acquired by parents to help fund their child's education. Plus loans usually have a higher rate of interest, have a variable interest rate, and have to be repaid within 10 years.
Perkins Loans are low interest, fixed-rate education loans that offer a small amount of funding (up to $4,000 per year) and are offered directly through the school.
If the interest rates on the various education loans that you take out are higher than you'd like, you can always fall back on loan consolidation. Consolidation loans combine several education loans from different sources into one loan from a single lender, which is used to pay off the balances on the other loans, much like refinancing a mortgage. Consolidation loans are available for most federal loans, and some lenders offer private consolidation loans for private education loans as well. You can, though, only apply for consolidation loans after your loans have gone into repayment status.