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What are the Types of Student Loans Available?


If you are like millions of other students around the country, you might be wondering about the various types of student loans that are available to you. Trying to find financing for your college education can be, understandably, a very stressful situation. There are many financing options out there, but it's important that you prioritize federal options before any others.

In this guide, we are going to review the various types of student loans that are available to you and under which situations you should use them.

Why Prioritize Federal Student Loans?
If you are a student or incoming student who is looking to fund your education, then it is very important that you consider federal options before any others. However, you might be wondering why. The reason that you should prioritize federal options for student loans is that they generally have the most generous financing terms and interest rates. Student loans can already be tough to pay back—there's no reason to make it more difficult by passing over affordable loans, even if they are available.

Types of Federal Student Loans
Now that you know to explore your federal student loan options first, you are going to need to know the various types of federal student loan assistance that are available to you. Here are the types of loans that you can get from the federal government to help you pay for your education.

Direct Subsidized Loans
These are the most basic type of loan that the federal government offers to people. They consist of direct funding and are awarded to eligible undergraduate students who are able to demonstrate their financial need. They are intended to cover the cost of education at a college or career school. The loans are subsidized because the federal government pays the interest on the loan while you are in college and for the first six months after you graduate.

Direct Unsubsidized Loans
Unsubsidized loans are similar to direct subsidized loans except that they are open to both undergraduate and graduate students, and the federal government does not subsidize the loan by paying the interest while you are in school or for the first six months after you graduate. In addition, you do not need to demonstrate financial need to receive a direct unsubsidized loan.

Direct PLUS Loans
If your existing student loans are just not going to cut it, then you might consider applying for a Direct PLUS Loan, which is intended to help offset the costs of expenses that are not tuition such as rent, textbooks, and more. PLUS loans may be obtained by graduate or professional students (Grad PLUS Loan) or by the parents of undergraduate students (Direct PLUS Loan). Borrowers need to have a credit check to qualify.

Direct Consolidation Loans
If you have a lot of federal student loans and want to make things more simple for yourself, you might consider direct consolidation loans. These loans will combine all of your loans under one payment, making them easier to manage and pay back.

Private Student Loans
If the amount that you can borrow through federal loans is not enough, then you might consider getting private loans to fund your education. This is generally the best option after exhausting all federal student loans, since private student loans often come with higher interest rates.