Overview of Federal Student Loans and Private Student Loans

The Federal and Private Student Loan Process

The process of applying for student loans can be both stressful and confusing. To help, this tutorial reviews the basic types of student loans and how you can qualify for them.

Interest Rate Types

There are two fundamental interest rate types of student loans, subsidized and unsubsidized. Very simply put:

• Subsidized loans have some or all of the interest paid by someone besides the borrower while the borrower is in school. Examples of subsidized loans include the subsidized Stafford Loan and Perkins Loan.
• Unsubsidized loans have interest which accrues from the day the loan starts; you may not be making payments on that interest while in school, but the interest clock is ticking. Examples of unsubsidized loans include the unsubsidized Stafford Loan, Parent PLUS Loan, private alternative student loans, and student loan consolidation.

Loan Programs

There are also two fundamental lending types of student loans, federal and private (Also see: Student Loan Introduction).

• Federal student loans are loans issued by or guaranteed by the U. S. government. These include loans from the U.S. Department of Education, as well as Department of Health and Human Services. Most major banks and credit unions also offer federal student loans; these loans are backed by the U.S. government. And finally, student loan consolidation services offer federal consolidation loans. Interest rates on federal student loans are set by Congress every year, and are traditionally fairly low compared to private loans.
• Private student loans are loans issued and guaranteed by non-federal organizations. These include loans from organizations such as TERI, state or local student loans, private bank student loans, and private agency loans (such as the Sallie Mae Signature Loan). Interest rates on private student loans are set by the issuing lender and can vary wildly. We recommend the Act Education Loan as a reliable source of private student loans.

Beware! Not everyone knows the difference between federal and private student loans, so make sure when you apply for a loan that you are signing a promissory note for the appropriate loan type.

Privacy & Subscription Information

You can always change your subscription options by visiting our subscription page, located at:

• http://www.FinancialAidNews.com

We value your privacy. We do not under any conditions sell, rent, share, or distribute your email address at any time unless you specifically request that we do so by applying for a specific product or service. Organizations and companies that wish to communicate with you must do so by sponsoring our newsletter.

Would you prefer to read Financial Aid News as an RSS feed? You can! We update the feed for each issue. You can subscribe to it using FeedReader or any RSS/XML feed reader at:

• http://feeds.feedburner.com/StudentFinancialAidNewsandPodcast

Subscribe to our podcast in 2 easy steps!

1. Download iTunes and install it.
2. Click here to subscribe!

If you wish to write us via postal mail, you can direct correspondence to:

The Edvisors Network, Inc.
1250 Hancock Street, Suite 703N
Quincy, MA 02169

Back Issues

Missed an issue? Did you remember a scholarship but can't find the back issue? You can always find back issues of the Financial Aid Newsletter at:

• http://www.FinancialAidNews.com

Want to tell a friend about the newsletter? Forward a copy to them, or have them visit:

• http://www.FinancialAidNews.com

Sponsor the Financial Aid Newsletter!

Sponsorships are limited to one per month. Your Sponsorship message in the newsletter will be delivered to more than 779454 subscribers, many of whom forward the newsletter to friends, associates and customers. If you would like us to consider you or your company for Sponsorship, please send email to: newsletter@financialaidnews.com

Share this page!