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Student Loans

Student Loan Options: Private vs. Federal

student loan options

If you or a family member is thinking about going to college or has already been accepted to a university, the cost of tuition, books and housing may seem overwhelming. Fortunately, there are many ways to finance your education, including scholarships, grants and loans. Student loans are available for both graduate and post-graduate studies.

Here is a quick guide to two main types of student loans:

Federal Stafford loans

Many students are eligible to receive federal Stafford loans. These direct loans come from the Department of Education, so you don’t need to use a private lender. In order to receive federal loans, you must complete a FAFSA, or Free Application for Federal Student Aid. This application will determine the amount of the loan and whether it is subsidized or unsubsidized.

Subsidized loans will not accrue interest until you must begin repaying the loan six months following graduation or the time when you drop to less than half-time status. Unsubsidized loans begin to accrue interest from the day the loan starts.

These federal loans may require you to receive counseling in order to become familiar with the interest and repayment plans that correspond with your particular student loan. You may also be required to get a Master Promissory Note or MPN in order to receive the money for the student loan.

Private student loans

Private student loans come from private lenders. Many of these lenders have Web sites where you can calculate your loan repayment schedule. These private lenders also allow you to shop around for competitive terms and interest rates. Your current university, or the university you’re interested in attending, may be able to direct you to lenders that award student loans.

Finding out about your student loan options early on can save you money, so get in touch with your school’s financial aid office. Learning the pros and cons of federal versus private student loans can help ensure that you’re not drowning in debt by the time you graduate.