All about Federal Student Loans

Federal student loans are one type of aid that is available to those who need financial assistance in order to further their education. There are many different kinds of federal loans.

The Different Kinds of Educational Loans

Federal student loans tend to fall into one of the following categories:

  • Student Loans - Many students do depend on federal student loans to finance their entire college education. Student loans are popular because they have low interest rates and offer numerous options for deferred payments plans. Federal student loans do not require a credit check or collateral to secure a loan. Some even have extended repayment terms that go along with them. Two of the most popular student loans are the Federal Perkins and Federal Stafford Loans.
  • Parent Loans - This type of student loan is also called a PLUS loan. Parents of dependent students usually get the loan as a supplement to their kid's aid packages. This loan is used to cover costs that are not covered by financial aid. There is no limit on these loans and either banks and or the government can fund them.
  • Private Student Loans - These loans are also known as alternative education loans and they help pick up the balance that is left between the total cost of your education and the limited amount of money that you are allowed to borrow through government programs. Private lenders give private education loans dependent on a borrower's credit history.
  • Consolidation Loans-This type of loan is somewhat similar to a mortgage consolidation loan. A consolidation loan groups together all student and parent loans and creates a single payment. These consolidation loans are available for most federal loans.

Which type of educational loan is right for you?

You and you alone are the only one who can determine which type of federal student loan best suits your needs. Therefore, closely considering all of the educational loans in detail before you decide what loan category will be perfect.

An innovative educational loan to consider as well

An innovative type of educational loan to consider is called a peer-to-peer education loan. Peer to peer lending is also known by other names including person-to-person lending, microfinance and micro loans, and social lending. Peer-to-peer lending always takes place between two people. There are many peer-to-peer lending sites online.

Factors to consider before choosing a specific lender for an educational loan

Just as there are different kinds of federal student loans to examine, there are other factors to consider before you choose a specific lender. Every federal student loan has different guidelines and limits as to what they can do for students. Some of these are as follows:

  • The limit on how much you can actually borrow.
  • The specific interest rate.
  • The mode of disbursement.
  • Additional fees that come along with the loan.
  • What will happen if you have trouble repaying the loan.

Sources:

http://www.finaid.org/loans/

http://studentaid.ed.gov/PORTALSWebApp/students/english/studentloans.jsp


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