College Loans

Federal Loans

Direct Subsidized Loans are issued by the U.S. Department of Education and awarded on the basis of need. The government pays the interest on them while you are in an undergraduate program, for six months after you graduate, and during deferments. You can only borrow as much as your school determines you’ll need and the annual limit you may borrow is capped.

Direct Unsubsidized Loans are also federal loans. They are not awarded on the basis of need and are available to both undergraduate and graduate students. These may be necessary if your family makes too much for you to qualify for other types of aid. Your school will determine how much you can borrow based on your cost of attendance and other financial aid you may have. You’re responsible for all the interest on this loan while you’re in school and afterward, although you can let it accrue and pay it back when you graduate and start repayment.

Direct PLUS Loans are federal loans for the parents of dependent undergraduates or for graduate and professional students. To receive one of these loans, the applicant must have a good credit history. These loans carry a slightly higher interest rate than Direct Subsidized and Unsubsidized Loans. As long as the graduate or professional student is in school at least half-time, the PLUS Loan will be placed into deferment and repayment will not start until six months after the student ceases to be enrolled. A parent borrower may request a deferment of payment on a PLUS Loan if the student is enrolled at least half-time. The repayment period will not start until six months after the student is no longer enrolled at least half-time. Interest accrues on both types of PLUS Loans from the date the loan is issued.

Private Loans

Private loans are another option to help pay for college if additional funds are still needed for college. Private loans often have higher interest rates, require payment while the student is still in school, and do not offer subsidized interest.

Private loans may also have less flexible repayment terms than federal loans. Forbearance, grace periods, deferment, and loan forgiveness may not be offered, which can be a burden when you’re just out of school. You may also need good credit or a cosigner to get them.

However, private loans are available from a variety of lenders and it is worth your while to compare rates and offerings if you’ve exhausted other financial aid options. You may find one that will give you just the extra help you need. But, as with any loan, borrow only what you need.