What are the different types of student loans for undergraduate students?
There are three types of student loans for undergraduate students.
Federal Perkins Loans:
- Fixed 5% interest rate.
- Maximum award of $5,500 per undergraduate year.
- School-awarded.
- Very limited availability.
Federal Stafford Loans:
- You must be enrolled at least half-time.
- Interest rate is fixed at 6.8% for unsubsidized Stafford loans; 3.4% for subsidized Stafford loans for the 2011-12 academic year.
- Award limits are based on your year in school and your dependency status.
- Repayment normally starts six months after leaving school (or attending less than half-time).
- There are two types of Stafford Loans – subsidized (for which you must demonstrate financial need and the interest is paid by the federal government while you are in school) and unsubsidized (which is not based on need, but you are responsible for all the interest that accrues).
Private Loans:
- Are borrowed through private entities, banks, credit unions or lending companies
- Interest rates can vary
- Can borrow up to the total cost of attendance, less other financial aid
- Interest can be capitalized more often (meaning, added to the loan principal), increasing the amount of money you ultimately are charged for borrowing.
- Approval and terms for private loans are based on credit history. If your rating is bad or non-existent, you might need a co-signer to qualify. Poor or minimal credit may also result in a higher interest rate on your loan.
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