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Types of Student Loans

June 27,2010 by: Dallas Browne

Student loans are often a common point of discussion. This is because most of the prominent colleges have a student fee that is higher than what most of the eligible and selected students can afford. However, education in a reputed college is an opportunity no student wishes to pass and this is where they seek student loans which come with a varied spectrum of terms, conditions, interest rates etc. Some student loans are more favorable and hence more popular than the others. Some are need based while others are not and in all situations, the interest rate and the conditions for repayment are different.

A good example of a need based student loan is the Federal Perkins Loan. This loan is popular for the low interest rates. The school’s office for financial aid makes arrangements for this loan for those students who are supposedly in exceptional financial need which is why the interest rate is so low. The loan has to be repaid only upon completion of education, or when the student’s status falls below half-time. The repayment is done to the school itself.

There are two other types of student loans called Stafford loans which are either subsidized or unsubsidized. The subsidized loans are those in which the interest rate is paid by the government itself until, the student completes his or her education. The unsubsidized Stafford loans unlike the subsidized ones are not need based and hence the interest rate is not paid by the government. Instead it accrues over the loan period and until it has been repaid. This is an option taken by students who do not qualify for financial aid or assistance.

Student loans can also be alternative loans. These loans are not federal loans. In federal loans, the students get the loan amount irrespective of their credit status and history. In alternative loans, the students get private loans from lenders only after a credit check. This is similar to most personal loans. These loans are taken by students to supplement the loan amount they receive from other sources. You can learn more about the student loans from the financial aid advisor provided by the college. Interestingly, the loans are reported to credit bureau, meaning that defaults and repayment patterns will affect the credit history of a particular person.

Another loan which is for students but not exactly a student loan is the parent plus loans. These loans are given to needy parents who need financial assistance to support the education of their dependent children. This not only involves the tuition fee of the students but also their other expenditure like hostel stay, books and other articles bought etc. These loans too are credit based.

Student consolidation loans are another type where if a student takes quite a few loans to meet with his or her expenses, they can all be consolidated into one loan. The other lenders are duly repaid by just one lender. In case of federal student consolidation loans, it is the government that intervenes. Such loans have many benefits including a lower interest rate compared to the total paid to all loans and also in some cases discounts on the loans towards the ending months of the loan period.

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