Students generally must apply for financial aid to receive a college loan.
Many students need financial help to attend college, but not all qualify for scholarships and grants. Fortunately, there are many types of college loans available, with options for every student. Some college loans are based on financial need, some are government loans available to everyone, some require good credit and can be purchased through private lending sources, and some are available specifically to parents of college students. The most common types of loans are:
Stafford Loans
Stafford loans, PLUS loans, federal Perkins loans, and loans from private lenders are common types of college loans.
Stafford loans are Federal Family Education Loans (FFELs) or William D. Ford Federal Direct Loans. Stafford family college loans are for students. Direct loans are financed by the government and FFELs are financed by banks and other private lenders. The choice of FFEL or Direct is up to the school, not the student. However, the two programs are virtually identical in terms of eligibility and amounts available, but repayment terms may differ.
Many students take out loans to attend college.
Stafford Loans are offered after a student completes the Free Application for Federal Student Aid (FAFSA). The information is passed on to each selected school, and the school then puts together a financial aid package that includes the type and amount of loans the student is eligible for. These loans are subsidized or not, depending on financial need. If the loan is subsidized, the federal government pays the interest while the student is enrolled in college at least part-time or is in a deferment or grace period.
PLUS loans
PLUS loans are also direct loans or FEFLs, but can be borrowed by parents of dependent students. Borrowers must have an acceptable credit history. Direct PLUS Loan applications are provided by the school’s financial aid office. FEFL PLUS loan applications are provided by the school’s financial aid office as well as private lenders. PLUS loans are always unsubsidized. While PLUS Loans have historically been known as parent loans, they are now also available to college students and professionals on the same terms as parent loans.
Federal Perkins Loans
Federal Perkins Loans are available at some colleges, but not all. Eligibility is based on financial need and each school determines how funds will be allocated. Perkins Loans can be awarded to undergraduate and graduate students. There is no credit history requirement and loans are paid directly to the university.
Loans from private lenders
When government college loans are not enough to pay the full cost of attending school, there are private loans. There is a credit history requirement, but most loan programs allow a co-signer if the student does not qualify. For students interested in vocational programs that don’t receive the same types of aid as traditional colleges, private college loans can make up the difference and allow the student to pursue the program of their choice.