Student loans are a type of financial assistance that must be repaid to the lender. Loans can be provided by the U.S. Department of Education (federal student loans), or by private sector banks, financial institutions, and commercial lenders (private loans).
Both federal student loans and private loans require paying interest and an origination fee on top of the lump sum of loan money. The origination or activation fee is a one-time charge that you pay the lender for creating the loan; the interest is a percentage fee that accumulates over time from the date the loan money is paid out to you. Federal student loans usually offer better interest rates and loan terms and conditions than private loans.
Types of Federal Student Loans
Stafford Loans
There are two types of Stafford Loans: Subsidized and Unsubsidized. A subsidized Stafford loan is one where the U.S. Department of Education pays the interest on the loan during specific times, for instance, while the student is still in school. In order to qualify for a subsidized loan, a student must provide proof of their financial need. An unsubsidized Stafford loan is one where the student re-pays the interest in addition to the amount borrowed.
Perkins Loans
Perkins loans are federally funded but you borrow directly from the school and make payments directly back to the school. Your school will pay you, usually twice during the academic year, and by check. Sometimes the loan is applied straight to your school bill.
How to Apply
In order to apply for any type of federal student aid you will need to fill out a FAFSA. For more information about the FAFSA, please visit EducationGrant.com.
