What types of student loans are available?

Although earning a college degree has never been more important to succeed in the job market, it's also never been more expensive. Student loans are the most common way for many students to pay tuition, which is the most expensive part of attending a college or university. Filling out college applications for financial aid can be confusing, and there are many types of student loans available.

• Stafford and Perkins loans: These financial assistance packages are two of the most common student loans. Both are federal student loan programs, which means they are handled by the government. There are two types of Stafford loans, including the Federal Family Education Loan Program (FFELP) and the Federal Direct Student Loan Program (FDSLP).

These two methods of financial aid can be either subsidized, meaning that the government pays the interest on your loan while you're still in school, or unsubsidized, which means that although you are responsible for interest on your loan, you can hold off on payments until after you graduate.

• Parent Loan for Undergraduate Students (PLUS): This financial aid program is provided for the parents of students who are enrolled in undergraduate degree programs. As opposed to a full student loan package like the FFELP or the FDSLP, the PLUS loan lets parents borrow additional funding to supplement their child's primary student loan.

• Private Educational Loans: These financial assistance programs are often handled by private banks and are intended to bridge the gap between what your education actually costs and the maximum borrowing limit allowed by packages like Stafford or Perkins loans. Eligibility for this type of financing often depends on your personal credit score, although some lenders allow you to apply for a private educational loan with a co-signer, usually a parent or guardian.

• Consolidation Loans: Students can choose to lump their different loan payments into a single financial aid package, called a consolidation loan. Most federal financial aid programs, including the FFELP, FDSLP and PLUS loans, can be combined into a consolidation loan. You should be aware, however, that the number of FFELP lenders offering consolidated loans has decreased due to the current economic climate.

• Peer-to-Peer Education Loans: A relatively new form of student financing, this type of assistance package often involves a direct lending agreement between a bank and an individual. Although these loans are becoming increasingly popular, you should focus on federal loan programs before applying for a peer-to-peer education loan, as the repayment terms and interest rates are typically better. 

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