Think you can’t afford college because your parents aren’t paying? Don’t have the grades for a paid scholarship? Take a moment to consider student loans and whether or not they are for you.

Don’t know much about student loans? We’re going to break it down for you: what they are, the different types, how you can get one, and what happens after you graduate.

What Are Student Loans?

Student loans are used to help students cover the costs of tuition, room and board, and the expenses associated with college such as school supplies, books, and anything else you may need while at school.

Student loans have a much lower interest rate than regular loans because the financial institutions who issue them realize students cannot pay them back immediately (while in school) and typically do not require students to pay until after graduation.

A payment schedule is set up before the loan is issued so the student knows exactly when the loan will be paid back and how much money the payments will be.

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What Are the Different Types of Student Loans?

1. Federal Pell Grants

These types of grants are typically given to students of low-income families.

These loans are designed to provide less fortunate students with the opportunity to attain a quality education and to diversify the student population.

The amount of money awarded is based on the Expected Family Contribution which is based on the FAFSA form.

These types of loans do NOT have to be repaid as they are given to the student through government funding.

The maximum amount that can be awarded in one year is $5,550.

2. Federal Stafford Loans

In order to be eligible for this low-interest loan, the student must first fill out the FAFSA form.

While the loan must be paid back, the loan is deferred (post-poned) until 6 months after graduation. These loans are available in two forms: subsidized and unsubsidized loans. Subsidized loans are offered to students who require a higher level of financial assistance and the interest accrued while the student is attending school and during the grace period is paid by the government until after the grace period.

Unsubsidized loans require the student to pay all of the interests accrued. Interest rates vary based on the type of loan.

These types of loans are given to students directly from the United States Department of Education through the Federal Direct Student Loan Program.

3. Federal Perkins Loans

This loan is very similar to the Federal Pell Grant, however, the loan must be repaid by the student. They are also designed to aid students of low-income families.

This type of loan has a grace period of 9 months, and the interest (which is fixed at 5%) does not begin to accrue until the student begins to repay the loan.

According to, “… undergraduate students can receive a maximum of $5,500 per year with a lifetime maximum loan of $27,500. For graduate students, the limit is $8,000 per year with a lifetime limit of $60,000.”

4. Federal PLUS Loans

These loans are unique because they are taken out by the parents of dependent students, rather than by the student him/herself.

In order to apply for a PLUS loan, the student’s parent(s) must complete a Direct PLUS Loan Application and Master Promissory Note. This loan is unique in that it covers the entire cost of tuition, minus any other financial aid the student my receive from the school or elsewhere.

This type of loan carries a fixed rate of 7.9% and is applied from the date of the first loan disbursement until the day the loan is fully repaid. The loan must begin to be repaid 60 days after the last loan disbursement.

This loan is unique in that it offers a few different ways for parents to repay the loan: standard, extended, and graduated. Each of these repayment methods is designed to accommodate different types of incomes and circumstances so whether you can repay the loan right away or need to postpone it, there is a plan for everyone.

5. Private Student Loans

Private loans are different from federal grants or loans because they are not necessarily based on your financial need, but your credit score. These loans are not limited and can potentially cover all of your college costs from tuition and board, to your books and laptop.

These loans are not federal grants and must be paid back.

According to, “…Private college loans are designed to cover up to the full cost of your education, including unexpected costs such as additional tuition, fees, books, housing, and other costs not covered by your financial aid package or federal loans.”

The interest rate of your private student loan is based on your credit score as well as the credit score of the person who co-signs your loan. These rates will also vary between lenders, or the financial institution that issues your private loan.

Be aware that there are fees associated with these loans; make sure to fully read all documents and ask the right questions before signing any type of loan because it may be higher than you had originally assumed.

Because private loans differ between financial institutions, the repayment and grace period will differ. Some institutions may not require you to repay your loans until graduation or a certain period of time after graduation (grace period). Make sure to ask these questions before signing the loan so you know exactly when you have to begin repaying the loan.

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