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Student Loans

Federal Loans

The first kind of federal aid available is the traditional student loan. You borrow an amount of money towards your education, and the loan is repaid over a period of years with interest. The full amount of the loan plus interest must be repaid to the lending institution. There are three main types of federal student loans:

  • Perkins loans. Full-time or part-time undergraduates can receive up to $5,500 a year, with a maximum of $27,500 during your entire undergraduate career. The amount you receive depends upon your financial need, how much other financial aid you’re receiving, and the availability of funds at your school. Generally, these loans go to students who demonstrate the greatest financial need with Federal Pell Grant recipients getting top priority. Depending on the amount you borrow, you have up to 10 years to repay the loan. Perkins loans are repaid directly to your college.
  • Direct loans. These loans are administered by the US Department of Education. Under the Direct Loan Program, the funds for your loan come directly from the federal government. There are two types of Direct Loans: subsidized and unsubsidized. Subsidized loans are made to students who have demonstrated financial need, and have slightly better terms as a result (i.e. the government pays the interest on your loan while you are still in school). Unsubsidized loans are available to anyone and have less favorable terms.
  • Direct PLUS loans for parents. These loans are made to parents who are contributing to their child’s college education. The interest rates are higher than the previous loans, and there is no need-based qualification. Parents need to have a good credit history and be claiming their child as a dependent on their taxes.

State and Private Loans

Most states offer student loan programs as a supplement to federal programs. In Alaska, for example, the Alaska Commission on Post-Secondary Education offers grants, scholarships, and loans to Alaskan students studying both in-state and out-of-state. A simple Google search of “student loans” and your state will turn up many of the state-based resources available to you. Information for each state can also be found at www.CollegeScholarships.org. While the terms of these loans might not be as favorable as the federal loans, they do offer a competitive option for students seeking additional financing.

Private loans are also available through banks, credit unions, and other kinds of lenders. Usually these loans have the least favorable terms. But if you or your family have a relationship with a particular financial institution, this may be an option worth checking out. Also, you can ask the college’s financial aid office if they have a particular lender that they work with; often these are the best private loan deals.