Student Loans

Although they can force you into thousands of dollars in debt, student loans are often unavoidable; even after scholarships and financial aid are factored in, you may still need to take out a loan (or several) to cover your tuition costs. 

Before you select a student loan, you should first make sure to fill out the FAFSA – more information about that can be found in this article.

Federal Student Loans

The federal government offers both subsidized and unsubsidized student loans. If you have a subsidized loan, the Department of Education will pay all interest accumulated while you’re in college, as well as for six months after your graduation date. These loans are only available to undergraduate students, though, and require that you demonstrate financial need before requesting them.

Unsubsidized loans are available to graduate as well as undergraduate students, and allow you to take out much larger amounts since they aren’t based on financial need. They will begin gathering interest as soon as the funds are made available to you, but you are not required to pay any interest until after you graduate. 

Both types of loans have the same fixed interest rate, so if you’re an undergraduate, it’s best to apply for a subsidized loan first.

Direct PLUS loans are another type of federal loan that require the applicant to undergo a credit check before receiving any funding. These loans are available to both graduate/professional students and parents of professional undergraduates. Students don’t have to start making payments on a PLUS loan until six months after they graduate. If you are a graduate student with limited credit experience or a poor history of paying off loans, you may want to apply for an unsubsidized student loans instead.

If you take out multiple student loans, you may decide to consolidate them into a single Direct Consolidation Loan; instead of making multiple loan payments each month, you can make a single – and sometimes lower – monthly payment. 

Private Student Loans

If you don’t qualify for a federal student loan, or if federal loans don’t fully compensate your financial need, you may choose to take out a private loan through a bank or credit union. These loans generally have much higher interest rates than federal loans,and they offer both fixed and variable interest rates. 

As with Direct PLUS loans, your credit history is taken into account when you apply for a private loan; a bad credit score could significantly reduce your options. If you have bad credit, you may be able to apply with a cosigner, usually a parent or guardian. A warning to parents, though: as soon as a student is late with a payment, the lender will immediately request payment from the cosigner. Before agreeing to cosign a loan, you must be financially secure enough to make all payments on the loan.

You should always start with federal loans when searching for financial aid. If you do take out a private loan, make sure that you fully understand the terms and conditions of your loan before signing any contract with your lender.