What types of student loans are available in the US?

There are two broad categories of college student loans: loans based on financial need and loans not based on financial need. College loans based on financial need are advantageous because they have better terms and tend to have lower or fixed interest rates, which are subsidized (the government pays your interest while you are in college and for six months after you graduate). Therefore, you will not accumulate as much debt with a need-based loan and it helps that they offer more flexible repayment plans. It's a good idea to feel out the Free Application for Federal Student Aid (FAFSA) when applying for student loans to make sure you are eligible for a need-based loan.

College Loans Based on Financial Need:

Federal Perkins Loan:

The Federal Perkins Loan is an institutional, campus-based loan that is administered directly by the financial aid office at each participating school. In this case, your school is the lender, even though the loan is made up of government funds. The Perkins Loan has a low interest rate, currently set at approximately 5%.

Subsidized FFEL Stafford Loan:

A FFEL Program Loan is one type of Stafford Loan. Funds from your Federal Family Education Loan (a.k.a. FFEL) Program Loan will come from a bank, credit union or other lender that participates in the program. You'll need to choose a lender if you obtain a FFEL Stafford Loan (today many lenders offer online loan applications). Schools that participate in the FFEL Program will usually have a list of preferred lenders. Because the loan is subsidized, the government pays the interest that accumulates on the loan while you are in school and during a six-month grace period after college.

Subsidized Direct Stafford Loans:

A Direct Loan (or the Federal Direct Student Loan Program) is another type of Stafford Loan and works similarly to the FFEL Program, only in this case the federal government is the direct lender. Similarly, the Subsidized Direct Stafford Loan means that the government will pay the interest while you are at school and for six months after college.

College Loans Not Based on Financial Need

Unsubsidized Stafford Loans (FFEL Programs and Direct Loans):

These loans basically work the same way as the subsidized Stafford Loans, except for one major difference: This time you have to pay the interest, although you can defer the payments until after graduation.

Federal PLUS Loans (FFEL Programs and Direct Loans):

This is a loan for parents, in which your parents take out a loan to pay for your schooling. PLUS Loans are available through the Federal Family Education Loan (FFEL) Program and the Direct Loan Program. The Direct Plus Loan comes directly from the U.S. Department of Education while the FFEL program works through a bank, a credit union or another lender that participates in the program. Generally, your parents can borrow up to the total cost of your attendance, minus any aid received. If the loan is approved (your parents must have an acceptable credit history), the money is sent directly to the school and repayment starts within 60 days after the final disbursement of the loan.

Private or alternative loans:

Private education loans are available to students, usually at higher interest rates than the federal loans described above. Colleges and universities may provide a list of private loan sources; you can check with banks or other financial institutions with which you have accounts to see if they apply. Although they are not necessarily considered college financial aid loans, for many families these loans are a key way to afford paying for college.