by Edwin Ivanauskas | Tags: Personal Finance, Investing

There are quite a few different types of student loans available including the Federal Stafford Loan, the Federal PLUS Loan, the Federal Graduate PLUS Loan, the Federal Consolidation Loan, and private loans. It is important to understand these different types of student loans before you borrow any money.

The Federal Stafford Loan

This type of student loan consists of two departments the Federal Family Education Loan (FFEL) and the William D. Ford Federal Direct Loan program (FDLP). Schools generally participate in either the FFEL program or the FDLP but sometimes do both. The Direct loan program is funded by the federal government while the FFEL program is funded by banks or other participating organizations. The rules and eligibility for both programs are the same but the repayment terms may differ.

If you want to apply for a Stafford loan you first need to complete the Free Application for Federal Student Aid (FAFSA). You will use the FAFSA to apply for all types of federal student aid and it will serve as your application for the Stafford Loan Program as well.

Federal PLUS Loan

For student loans like the Federal PLUS Loan only eligible parents of dependent students may qualify for a Federal PLUS Loan. An eligible parent is a student's natural mother or father, or an adoptive parent. The parent must meet citizenship requirements and must not owe any money, or be in default of any student financial assistance program. This student loan in a "non-need" based loan, with low interest, and a variable rate which will never exceed 9 percent.

The yearly limit a parent can barrow is equal to the cost of attendance excluding any financial assistance. In order to become eligible for a Federal PLUS Loan, you must first undergo a credit check. You can be denied a Federal PLUS Loan because of a bad credit score but you can get an endorser, or you can get a loan under the Federal Direct Unsubsidized Loan program.

Federal Graduate PLUS Loan

Graduate and professional students can borrow money under the Federal Graduate PLUS Loan program. The terms and conditions of the PLUS Loan program are the same. You can borrow up to the cost of attendance minus your financial aid and including any other loans. The same federal credit requirements apply as in the Federal PLUS Loan program. Repayment will begin sixty days after the loan has been disbursed but you can defer payments for when after you graduate. Most financial institutions will automatically defer the payments for you but you should double check by contacting your school or servicer once the final year's disbursement is made.

Federal Consolidation Loan

Student loans such as this one allow you to combine all the eligible federal student loans you have gotten to finance your education into one single loan. The consolidation can lower your monthly payment and offers the security of a fixed interest rate and can extend the repayment to up to thirty years. Keep in mind that you may pay more interest over the life of the loan if you make your repayments go up to thirty years.

Private Student Loans

Private student loans are also available; these tend to be more flexible than federal loans. They will not only cover tuition, but they will cover books, school supplies, housing and other school related expenses. They will also give the student the ability to build up their credit if they have no credit or even bad credit. These loans are a good option for students who need flexibility with their loan money so they may be able to buy textbooks and other school related items such as pens, paper and any supplies they may need for their classes. These loans are not government operated, but are made available through private organizations that want to make taking out a loan easy for those who want to further their education.

Bank Loans

There are many banks who will loan out the money to pay for college. These loans vary from bank to bank, but they are all usually of low interest and are designed to be available to anyone who is interested in going to a college or university. Those who are interested in a bank loan should find out what kind of student loans their bank offers.

There are many different kinds of loans people can get in order to pay for their education. Some of these loans are strict in that they will only cover tuition, while others are more flexible in what they can be used for. People who are interested in taking out a loan should shop around to determine what loan will work best for their situation.

Repayment Terms

It is important to remember one of the most valuable features of student loans, deferred payments. While normal loans like a loan on a car or a house require you to pay increments the moment you receive the loan, student loans allow you to defer all payments until 6 months after graduation. This allows the student a lot more flexibility when it comes to living expenses and allows the student to move their student loan payment to a point in time where they can potentially have a much higher income to pay it with.

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