Are you on your way to college and looking to get a student loan to help cover the costs? Learning about the many types of loans available can guard you with the knowledge you need to choose the right one for your needs and save you thousands of dollars. Additionally, understanding how they work will prepare you to ask the right questions and look for the best rates possible.
Top Student Loan Options
Federal student loans. For undergraduates who qualify for a federal subsidy, the government pays the 4.6% interest while you’re in school and for the following six months. Unsubsidized Staffords cost 6.8 percent. Both programs charge a one percent fee.
State programs. Seventeen states lend money to students who will attend in a state college or university. Fixed rates range from 6 to 8.19 percent. Variable rates generally range from 1.78 to 3.8 percent.
The variable loans with change early on July 1. In some states, repayments will begin while the borrower is still in college. Nonetheless, state programs offer better terms than borrowers get from banks.
PLUS loans. When and if parents can help, the right choice is a federal PLUS loan. Borrowers will pay a fixed 7.9 percent (with past years having some parents pay up to 8.5 percent), plus a 4 percent fee.
Provided that they can pass a credit check, parents can borrow the entire remaining cost of higher education.
Unsubsidized loans from private lenders. These loans are offered by private lending institutions. They all vary in cost and rates. Borrowers have the potential to save thousands of dollars by investing a couple of hours in comparison shopping.