Student Loans - Also Known as Plus Loans

Loans are a type of financial aid that must be paid back. There are three types of student loans. Federal Loans given to students, federal loans given to parents and private loans.

The first type of loan is the loan given directly to students. They include Stafford loan, Federal Family Education Loans, Ford Direct Student Loans, and Federal student loan consolidation. These loans are directly available to the students and are available as subsidized or unsubsidized loans.

These loans should be paid after graduation. The grace period for both kinds of student loans is 6 months that means that a student has a time of six months after graduation during which he is exempted from paying anything.

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If a student's credit hours are less than half then his grace period is over and he has to start paying the loan. The main difference between subsidized and unsubsidized loans is that one is exempted from paying an interest on a subsidized loan until after the graduation.

The credit limit for undergrad freshman is 3500$ and it reaches the limit of 8500$ for graduate students. This limit increases to 12500$ per year for unsubsidized loans.

The second type of student loan is the loan given to parents. These are also known as PLUS loans. These loans have a much higher limit. This helps in meeting any gap in the education cost but the payments start immediately as there is no grace period. Parents are solely accountable for the payment of the loan. The interest rate on the PLUS loans is 8.5%.

The third type of student loan is the loan given by private banks and finance corporations. These loans have a limit higher than any federal loan. These companies provide the best financing terms and condition. Some companies even provide a grace period of twelve months. There are two types of private loans: direct to student/parents or through school channels.

The direct to consumer loans have a higher interest rate but are quick to process while the loans borrowed through school channels are slow to process but have a lower interest rate. The loan rate for private loans is higher than federal loans. The overhead charge depends upon the credit scores of a person.

One added advantage of private loans is that foreign students are also eligible for the loans but an American resident co-signer is also needed. They also charge a fee for the loan. If the credit score of a person is high then the fee charge can be omitted and the interest is also low. A statement of APR (Annual percentage Rate) contains all possible types of fees and it is provided when the loan is granted. It should be used to compare the overall interest and fee when comparing the loans. Some federal and private student loans can be omitted if a student declares himself bankrupt and meets some conditions but these conditions are hard to meet.

Nowadays strict laws have permitted the loan companies to impose heavy fines on a bankrupt person. They are also punished in different ways like withholding of professional degrees or imposing heavy fines on them.

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