Student Loan Facts

Federal student loans are guaranteed by the U.S. Federal Government and may have lower interest rates or fixed interest rates. There are multiple repayment plans and no prepayment penalties.

• Private loans in most cases carry higher interest rates than federal student loans and may include a variable interest rate. Private loans can have prepayment penalty fees.
• If you consolidate federal student loans with a private lender you will forfeit the many benefits and programs available only through the U.S. Department of Education
• If your bank (or other financial organization) provides loans backed by the federal government they are likely participating in the FFEL program and this should be clearly described at as a federal student loan. Some private student loan lenders utilize forms that look similar, but are not backed by the federal government. Make sure to look closely and ask questions.

Default occurs if you fail to make payments on time. Once a student loan goes into default the full balance of the loan becomes due – immediately. It also means that other options for delaying payment, including student loan deferment and forbearance, are no longer available.

The three most common types of loans are:

• Stafford Loan
• Parent PLUS Loan (including the Grad PLUS Loan)
• Alternative student loans (Private Student Loans)

While there are no absolute ways to determine which student loan programs are best there are some general guidelines.

There are two different types of Federal Stafford Loans: (i) subsidized, (ii) unsubsidized.

• Subsidized Stafford Loans are awarded based on financial need. You will not be charged interest before you begin repayment or during periods of deferment. The federal government “subsidizes” the interest during these periods.
• Unsubsidized Stafford Loans are not awarded based on financial needs. Any eligible student can take out unsubsidized Stafford Loans. You will be charged interest from the time the loan is disbursed to the time the loan is repaid in full.

• Interest subsidy: subsidized loans are far better than unsubsidized loans
• Lowest cost: the loan’s interest rates and fee structure determine the finance charges. Some loans (like mortgages) allow you to pay up-front fees in exchange for a lower interest rate over time. Loans with a longer repayment period are often less expensive.
• Interest rate options: some are fixed and stay the same over the life of the loan. Some are variable and tied to the prime interest rate (or other index). Rate adjustments can occur annually, quarterly or monthly.
• Flexibility: consider the repayment options offered. Can the principal be deferred? Are alternative repayment programs offered (e.g., graduated or income-based repayment programs)

• Direct Subsidized Stafford Loans
• Direct Unsubsidized Stafford Loans
• Direct Parent Plus Loans
• Direct Plus Unsubsidized Consolidation Loan
• Subsidized Federal Stafford Loans, formally Guaranteed Student Loans (GSL)
• Unsubsidized and Non-subsidized Federal Stafford Loans
• Federal Nursing Loans
• Federal Perkins Loans
• Federal Parent Plus Loans
• Subsidized Federal Consolidation Loans
• Unsubsidized Federal Consolidation Loans
• Federal Supplemental Loans for Students