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Knowing Which Is the Best Student Loan
Student loans including both private and government are offered by a variety of lenders. Just because a student applies for one of them does not mean that he is going to qualify for it. Certain, very specific, requirements are in place for each type of student loan. Understanding the differences and requirements before applying for the loan can improve an individual's chances of qualifying for a student one.
In general, student loans can be differentiated into several categories: subsidized government loans, unsubsidized government loans, and private loans. Each type of loan has its own set of criteria.
Federal Student Loans
Federal student loans are offered to individuals based upon need. They are available in two different types: subsidized and unsubsidized government loans. Two basic differences exist between these two types of loans which are given out based on the student's level of need.
Subsidized government loans are offered to the students who demonstrate the greatest financial need. The government subsidizes or covers the cost of the interest on these loans while the students are attending school. Subsidized student loans have a cap or limit that can be offered according to the student's year in college.
Unsubsidized government loans are also offered to students who demonstrate financial need. However, these students generally have better financial resources and so these loans are not subsidized. The government does not cover the cost of the interest on these loans while the students are attending school. The student must cover this expense. Unsubsidized student loans have a limit as to the amount that can be borrowed according to the student's year in college.
In order to apply for one or both of these types of loans, the student needs to complete the FAFSA or Free Application for Federal Student Aid. The FAFSA is available online as well as on paper.
Private Student Loans
Private student loans are offered by lenders on a first come basis. A limited number of private student loans are available at any given time. Therefore, once a student or the student's family realizes that borrowing money to finance college is a certainty, they should apply as early as possible in order to obtain the best interest rates and terms.
Private loans are offered by many private institutions as well as by some non-profit organizations. Generally the amounts that can be borrowed with private loans are somewhat higher than the amounts offered with government loans.
Non-profit organizations sometimes offer subsidized student loans to those individuals who show evidence of need. However, most private student loans carry the need to repay the interest on the loan and are not subsidized while the student is attending college.
