Student Loans

There are at least two kind of student loans: Government student Loans and Private student Loans.Which one is better for you? Well, it really depends on your personal situation and what you are looking for.

Government Loans

Government Loans is Federal money that the Federal Government makes available through the Department of Education for students to be able to pay for their college tuition. For many, these are the best loans because they are guaranteed and the terms are easier for the borrower, of course, the Federal government needs to approve the institution you chose to study in order to lend the money to you.

Within Federal government there are at lest 20 different types of Student Loans, here are some of the most popular:

Federal Stafford Loans – Federal Direct Loans- Federal Perkins Loan- Direct Consolidation Loans

Federal Stafford Loans are fixed rate loans for graduate/undergraduate students enrolled at least half time in an American Institution

Federal Direct Loans are low interest loans available for parents and students to be able to pay for higher education.

Federal Perkins Loan is a loan designed for students in need. The loan is given by the college but regulated by the Federal government, in other words, is the Federal government who decides what students are eligible to borrow this money.

Direct Consolidation Loans are a great way to consolidate one or more of your Federal Education Loans. This loans offer several benefits like one monthly payment to one lender, reduces monthly payments, etc…

Private Student Loans

Private Student Loans are unsecured loans given by financial institution. These are similar to traditional consumer loans. On private loans financial institutions are the ones that determine the interest rate apply to the loan based on the risk the institution perceives from the borrower. Private Student Loans are managed differently because usually a student lacks credit history, which makes him/her vulnerable to higher interest rates or limits on the amount of money they can access at once.

The biggest Private Student Loan lender is SLM Corporation; commonly know as Sallie Mae, a former government sponsored entity turned private in 1997.

Some people rather private loans over government loans, they mention less paper work and access to more money as the main reasons. Do keep in mind that when applying for a private loan, you could end up getting higher interest rates and in the case of not having credit, you might need a co-signer.

Government Loans Vs. Private Loans? Really, it depends on your needs and what you can deliver.