Your Quick Guide to Federal and Private Student Loans

When you’re preparing to pay for college, it can feel like piecing a patchwork quilt together. If you’re like most students, you’ll need to supplement your savings and scholarship money by taking out some student loans. Here’s a brief introduction to the student loan options available to help fund your education.

Federal Student Loans

Several different kinds of federal loans are offered to students and their parents. Federal loans offered directly to students generally do not require a credit history or cosigners and they have fixed interest rates. Details on each of these loans can be found on the Federal Student Aid website.

• Federal Perkins Loan: A federal loan program that operates in cooperation with individual colleges, where the college is providing the loan. It is dependent on the student’s financial need and the college’s funds available to students.
• Direct Subsidized Loan: Offered to students who show financial need, these loans do not charge you any interest while you are in school at least half-time.
• Direct Unsubsidized Loan: These loans don’t require you to show financial need, and they are available in larger amounts than subsidized loans.
• Direct PLUS Loan: These are federal loans offered to your parents, so that they can help you pay for school. There is no financial need requirement, but the borrower has to have good credit history.

Private Student Loans

Many students find that federal loans do not cover all the costs of attending college and will supplement them with private loans. Private student loans may be offered by your university as well as by state agencies, banks, and credit unions. They may have fixed or variable interest rates and a variety of repayment terms, so it’s a good idea to shop around. Getting the best rates is dependent on factors such as credit history or whether there will be a cosigner or not.

• School Lending: Your school may offer you a private loan as part of your financial aid package. These loans often have good interest rates, but are not available in large amounts.
• State Agencies: Each state has its own financial resources available to college students who are residents of that state. Sometimes the state will repackage federal loans under different terms, or offer loans especially for students planning to enter certain careers.
• Large National Banks: These bank loans may mean higher interest rates and less flexible repayment terms. Banks also require certain income and credit levels, so a cosigner is usually needed.
• Credit Unions and Community Banks: Because credit unions are not-for-profit organizations, they can offer lower interest rates than traditional banks — sometimes even less than half the bank’s rate. Community banks are also more willing to lend money at lower rates. They can also help with refinancing and consolidating other loans you’ve already taken out.

We offer private student loans through a network of community banks and credit unions. Check out our private student loans page to learn more.