How to Differentiate Between Student Loan Types

Many types of student loans are used to help students afford college. In fact, many U.S. students can't pay for college without them. Student loans are often used in conjunction with scholarships and grants, as well as money parents and students themselves contribute, to fund overall college expenses. The average student loan debt of graduates graduating with a bachelor's degree in 2007-08 was $23,186. Approximately 13 percent of parents use federal PLUS loans, often in addition to the loans students take out themselves, to help their children pay college expenses.

Instructions

    • 1

      Research the different types of student loans that exist. The Internet or your school's financial aid office is a great place to start. Find out about federal student loan programs, private loans and parent loans.

    • 2

      Call lenders and ask them directly about their student loans. They can give you accurate and up-to-date information over the phone or refer you to additional resources they believe will be helpful. Ask lenders to answer honestly what the pros and cons are to getting a student loan through them.

    • 3

      Compare student loans based on the research you collected. Things that will help you differentiate between loans includes: interest rates, whether the loan is subsidized or non-subsidized, repayment options, grace periods, eligibility criteria, maximum loan amounts and limitations on how the funds can be used. Some loans do not accrue interest while you are a student while others do, and some loans have variable interest rates which can make a big difference.

    • 4

      Ask someone you trust to help you differentiate between loans if you still are uncertain. Also consider making an appointment with a financial aid adviser at your school. Sometimes, others see something that is missed right away and are an excellent source of feedback.

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