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For those who make the decision to attend college, community college or vocational school, there are several student loan types available to make getting an education easier. Some of the best are offered by the federal government though private companies offer many attractive forms of borrowing, as well. Understanding the different student loan types available is the most important part of arranging your financing.
The most common type of loan taken from the federal government for education is the federal Stafford loan. Compared to other student loan types, this loan has great interest rates, flexible repayment terms and the requirements are very accommodating. No credit check is required; one need only be in school half-time and need is the major determining factor in eligibility.
Private loans are the other major type of lending used toward education. Private student loans are offered by companies that operate for profit. Their terms are generally based on your personal credit rating and, depending on your score, can be higher than what the federal government offers. These student loan types should be used to fill out what federal programs cannot. Because the rates tend to be higher, it pays to rely more on the federal programs.
Private loans can be of the signature type, where one simply signs an agreement promising to pay back the funding taken. These loans will sometimes require the signature of a cosigner who vouches for your creditworthiness. Where private loans are concerned, there are two principal types.
The first type is for full time students seeking a four-year degree. The payment on these loans will be in forbearance until a certain time after the student leaves school. This “grace period” is generally shorter than it is with federal loans. The second type of private student loan types are those targeted toward those continuing their education but not seeking a degree. Depending on the amount of time one spends in school, the loan may be in forbearance during the academic year or payments may be scheduled to start immediately upon disbursement of the funds.
There are other types of funding available, as well, such as grants and scholarships which generally require no repayment. Using the different student loan types to your greatest advantage generally involves preferring grants over federal loans and federal loans over private loans.