What Are the Most Common Student Loans?
The most common student loans in the United States are federal student loans, which are funded and regulated by the federal government. Here are the most common types of federal student loans:
- Direct Subsidized Loans: These loans are based on financial need. The government pays the interest on these loans while the borrower is in school, during the grace period after graduation, and during any periods of deferment.
- Direct Unsubsidized Loans: These loans are not based on financial need. The borrower is responsible for paying the interest on these loans during all periods, including while they are in school.
- Direct PLUS Loans: These loans are available to graduate or professional students and parents of dependent undergraduate students. PLUS loans can cover the remaining cost of education that other financial aid doesn't cover. PLUS loans require a credit check, and the borrower is responsible for paying the interest.
- Perkins Loans: Perkins Loans are low-interest federal student loans for undergraduate and graduate students with exceptional financial need. The school acts as the lender, and repayment is made to the school that made the loan.
- Federal Family Education Loan (FFEL) Program Loans: FFEL Program loans were made by private lenders and guaranteed by the federal government. These loans include Stafford Loans (subsidized and unsubsidized) and PLUS Loans. The FFEL Program ended in 2010, so no new loans are being made under this program, but some borrowers may still have existing FFEL loans.
It's important to note that as of July 1, 2010, all federal student loans are originated through the Direct Loan Program, which means they are made directly by the U.S. Department of Education.
While federal student loans are the most common, some students also take out private student loans offered by banks, credit unions, and other private lenders. Private student loans have different terms and conditions, and interest rates are generally higher than those of federal loans. Borrowers often consider private loans when they have exhausted federal loan options or need additional funding beyond federal loan limits. However, it's recommended to exhaust all federal student loan options before considering private loans due to the generally more favorable terms of federal loans.
Who Gives Out Most Student Loans?
In the United States, the majority of student loans are provided by the federal government. These loans are known as federal student loans and are administered through the William D. Ford Federal Direct Loan (Direct Loan) Program. Under this program, the U.S. Department of Education is the lender, and eligible students and parents can borrow directly from the federal government to finance their education.
Private lenders, such as banks, credit unions, and online lending institutions, also provide student loans. These loans are called private student loans. Unlike federal student loans, private student loans are not backed by the federal government, and their terms and conditions, including interest rates and repayment options, are determined by the lender based on the borrower's creditworthiness and financial situation.
While private lenders offer student loans, federal student loans are generally more common and widely used due to their favorable terms, including fixed interest rates, income-driven repayment plans, and forgiveness options. Federal student loans also offer various protections and benefits, such as deferment, forbearance, and loan forgiveness for public service employees, making them the preferred choice for most students seeking financial assistance for their education.