Choose the best option and pay for your education!
Think of student loans like any other loan: you borrow money, and you’re on the hook to pay it back along with interest.
The good news? Some student loans have really good terms, like lower interest rates and flexible repayment options.
Different Types of Student Loans
When it comes to financing your education, you’ve got two main players: Private Loans from banks or other lenders and Federal Loans from the U.S. government and.
Private Loans
Rates and Terms
Private student loans are offered by banks and other financial institutions. Generally, these loans come with higher interest rates compared to federal ones.
Plus, the rates can be either fixed (which means they stay the same for the life of the loan) or variable (meaning they might change over time).
How to Apply
Applying for a private loan is pretty straightforward. You fill out an application with the lender of your choice, and they’ll check your credit history to see how much they’re willing to lend you and at what interest rate.
If your credit isn’t great, don’t worry! You might need a co-signer—someone like a family member or a friend with better credit—to help you secure the loan.
While private loans aren’t usually the first choice for many students, they can be a solid option if federal loans don’t cover all your costs.
Federal Loans
Interest Rates and Perks
Federal student loans are a safer bet and often come with better terms depending on the type of loan and whether you’re an undergraduate, graduate student, or a parent helping your child.
Main differences between Subsidized and Unsubsidized Loans
- Subsidized loans are fantastic for undergrads who can show financial need. You won’t pay interest while you’re in school, for six months after you graduate, or if you need to defer payments.
- The government covers those interest costs, which can really help you save in the long run.
- Unsubsidized loans are available to both undergraduates and graduates. Here, the interest starts accruing right away, which means you’ll need to pay it back eventually.
- You can choose to pay the interest while you’re studying or let it pile up and get added to your loan balance, which will increase what you owe overall.
How to Apply
To get a federal loan, your first step is to fill out the Free Application for Federal Student Aid (FAFSA).
This form is your ticket to figuring out how much financial help you can get, whether it’s loans, grants, or work-study opportunities.
You’ll usually find the results tucked away in your college’s financial aid package.
Just a heads-up: for the 2024-25 school year, the FAFSA deadline is June 30, 2025. But many colleges have their own earlier deadlines, and some types of aid are limited and given out on a first-come, first-served basis.
So, it’s a good idea to apply as soon as you can to boost your chances of getting the support you need!
Federal vs. Private: What’s Best for You?
In general, federal loans are often the way to go. They tend to be more flexible, with lower interest rates and better repayment options. But if federal loans don’t cover all your college expenses, private loans can still be a great backup plan.
More information
Here are more details about student loans you must be aware of.
Eligible Expenses
It’s important to know that loan money should only be used for education-related expenses—think tuition, fees, books, and housing.
How Much Can You Borrow?
For independent students, the maximum federal loan amount is $57,500; dependent students can borrow up to $31,000.
With private loans, you can typically borrow the total cost of attendance minus any financial aid you receive.
Payment Start Dates
After you graduate or drop below half-time enrollment, you usually get a six-month grace period before payments kick in.
Always keep in mind that student loans can be a helpful way to finance your education, but it’s crucial to use them wisely and understand the terms.
In case you want to learn more about finances, we invite you to read our next article on how to build your credit from scratch.