Did you know that the average college student takes out just over $19,000 in student loans during their four years in college? If you are wondering where this money comes from and how you can apply for student loans, it helps to first understand the different types of loans.
Federal Student Loans from the government make up the vast majority of student loans. The first step is filling out a Free Application for Federal Student Aid, or FAFSA form.
Subsidized Federal Stafford Loans are the most common need-based government-secured student loans with low interest rates (6.0%-6.8%), deferred payments until six months after graduation or you drop below halftime in your course load, and flexible repayment plans. “Subsidized” means that you are not accruing interest while you are in college, within the six-month grace period or in a deferment agreement.
Unsubsidized Stafford Loans are not need-based and the interest accrues while you are in college. The repayment period begins after you stop going to college, drop below halftime status (generally six credit hours in a semester) or graduate.
Federal Perkins Loans carry many of the same benefits of Stafford loans and are disbursed by the college to students with the most financial need. Key differences are that the interest rate is 5.0%, borrower eligibility is determined by tighter “need-based” standards, there are no fees and there is a longer grace period before repayment.