Types of Student Loans
The two largest federally-provided student loan programs are:
  1. The Federal Family Education Loan Program (FFELP): FFELP loans are provided to you directly through banks, private lending institutions and credit unions (i.e., SallieMae, Citibank, Wells Fargo) but follow rigorous federal requirements.
    2. There are four components to the FFEL Program:
    • Stafford Loan: Interest on a Stafford loan is paid by the government when you are in school and during your period of grace and deferment.
    • Unsubsidized Stafford Loan: Interest on an Unsubsidized Stafford loan is NOT paid by the government when you are in school nor during your periods of grace and deferment.
    • PLUS Loan: A PLUS loan enables your parents to borrow to pay the costs of your higher education - either for undergraduate or graduate studies.
    • Consolidation Loan: Although technically still a FFELP Loan, due to market conditions and Congressional legislation, most FFELP lenders are no longer offering a Consolidation loan because they have become unprofitable. You may still obtain a Consolidation loan through the Direct Loan program.
  2. The William D. Ford Direct Student Loan Program: Direct Loans under this program are borrowed directly through the federal government, rather than a third-party lender.
    3. There are four types of loans offered through the Direct Loan Program:
    • Direct Subsidized Loan: No interest is charged on a Direct Subsidized loan while you are in school at least half-time, during your grace period and during your deferment period.
    • Direct Unsubsidized Loan: Interest is charged during all periods, even during the time you are in school and during grace and deferment periods.
    • Direct PLUS Loan: A Direct PLUS loan is an unsubsidized loan for your parents to help pay for your graduate and post-graduate education. Interest is charged during all periods.
    • Direct Consolidation Loan: All eligible federal student loans, both FFELP and Direct, can be combined into one Direct Consolidation Loan.
    Both the FFEL and Direct Loan programs offer similar terms, which follow federal standards.
  3. Private Educational Loan: Because the cost of education has been rising at a record pace, in many circumstances, a gap is created between what you can borrow through the federal programs and the cost of your tuition. In order to finance this deficit, a Private loan may be necessary.
    4. Private loans, or “alternative loans," differ from loans issued under the federal program in that they are NOT guaranteed by any governmental agency. Thus, in order to obtain a private loan, lenders take into consideration your creditworthiness, income and other underwriting factors, as they would for any other type of credit.
    Private loans have a variety of different interest rates, payment structures and length of time to repay, and often require a co-signor or guarantor.
    NOTE: Private Loans have come under criticism for two reasons.
  1. Private loans, generally, have high interest rates and are typically offered with variable interest rates with no caps, which means that related interest costs
    could soar.
  2. Private loans lack the flexible repayment options offered with federal loans.