Basic Types Of Student Loans

There are two basic types of student loans that you can take out. The most common type of financial aid is the federal student loan. There is a process that everyone has to go through to get a federal loan. You have to fill out a FAFSA form and any other applications that your school requires. Once your information is reviewed, the federal government will award you with a certain amount of federal student loan aid. While there is a large amount of money available through federal loans, it might not be enough help to get through college. There is another option, a private student loan, which can provide the financial means to get through college.

Both a federal and a private student loan are sources of financial aid, but there are several differences between the two that you should be aware of before applying. A federal student loan is backed and guaranteed by the federal government. This means that there are lower interest rates and typically better payment plans. However, they are based mostly on financial need. So depending on how much your income and your parents income is, different amounts of money will be awarded.

A private student loan is a loan that is given out by a private lender. They are not backed by the federal government, so the interest rates will generally be higher. One benefit of these types of student loans is that they are not solely based on income and can cover other college costs besides tuition.