When paying back your student loans it is important that you familiarize yourself with the different student loan types. There are seven main types of loans; Stafford loans, Perkins loans, PLUS loans, consolidation loans, institutional loans, private loans, and state loans. Continue reading to learn about which loan would be right for you.
The most widely received loans are Stafford loans. Undergraduate students can be loaned up to $23,000 and six months after graduation the loans must begin to be paid off. There are many plans to choose from to repay your loan, but the standard repayment plan allows up to ten years for repayment.
Perkins loans allow different amounts to be loaned based on graduate/undergraduate status. Graduates may be loaned upwards $60,000, while undergraduates $27,500. Loans must begin repayment within nine months of graduation, and it is allowed ten years to be paid off. It is important to note that there is a five percent interest rate with Perkins loans, but it is paid by the government while you are in school or various other circumstances.
There are two types of PLUS loans; parent and grad. Parent PLUS loans can be borrowed by the parents or guardian of undergraduate students. It is important to note that parent PLUS loans aren’t based on financial standing, and have no borrowing maximum similar to grad PLUS loans. However, grad PLUS loans only lend enough money to equal the price of their schooling.
Consolidation loans are for students who have multiple loans to pay off. The interest rate on consolidation loans is a calculated fixed rate. Consolidation loans are usually paid off over an extended period of time. Like most other loans, there is no consequence for paying early, and many payment options are available.
Institutional loans are loaned out by schools to their students, and are non-federal. This type of loan is most closely related to private loans. The best way to find out about these loans is to talk to your school.
Private loans are frequently referred to as alternative loans. They are eligible to students or parents, and unlike most other loans, are not funded by the government. One thing to note with private loans is that they don’t give you many options when it comes to deferment which federal loans give you.
State loans are not available through federal loan programs. The interest rate is not fixed, and will fluctuate according to the state you are in. State loans do not offer the same benefits as federal loans, but the benefits are more than in private loans.