Exploring Student Loans

College students If someone in your household hopes to attend college in the not-too-distant future but you worry about having enough cash to cover all the costs, there are a number of options available to you. Knowing these options can help you figure out how to make higher education a more achievable goal.

Federal Loans

The federal government sponsors student loan programs at comparatively low interest rates, with no collateral required from the borrower in order to get approved for the loan.

Consider applying for one of the following loans from the U.S. Department of Education through the federal Direct Loan Program:

  • Stafford Loans: Available to undergraduate and graduate students, with only the subsidized version requiring the student to demonstrate financial need.
  • PLUS Loans: For either parents of students, or graduate or professional degree students. Although a PLUS Loan imposes no financial need requirements, the applicant may be required to pass a credit check.
  • Perkins Loans: Awarded to eligible undergraduate and graduate students with exceptional financial need, with no credit check required.

To apply for a federal student loan, the borrower must complete and submit the federal government's financial aid form, also known as the FAFSA (Free Application for Federal Student Aid).

Private Loans

Private student loans are made by financial institutions directly to students — the government is not involved in private loans and does not guarantee them. However, to apply for a private loan, you may need to complete the federal FAFSA form in addition to the lender's own application, depending on the lender's rules.

As with any other type of private loan, like an auto or home loan, the borrower's ability to obtain a private student loan will be based on his or her creditworthiness. A private student loan may or may not require the borrower to put up collateral in order to get approved for the loan.

State Loans

Many states offer a variety of student loan programs. To apply, complete an application provided by the state; you may also be required to complete the federal government's FAFSA (Free Application for Federal Student Aid) form.

Opportunities and submission requirements vary by state.

College Loans

Before applying to your preferred schools, be sure to inquire about any loan programs — including scholarship loan programs — they may offer. Most schools with such a program require applicants to complete the PROFILE form created by the College Scholarship Service. You may also need to complete a FAFSA (Free Application for Federal Student Aid) form.

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