You’ve filled out your Free Application for Federal Student Aid (FAFSA) and you finally receive your financial aid package. There are many federal student loans for which you can apply, and you have no idea which one to choose or which one is the best option. Below, I’ve listed a few types of loans to help you determine which will be the best for you.
Subsidized Loan: This type of loan is only for undergraduate students, and the maximum amount you can borrow for dependent students is $5,500. You have a six-month period starting after you graduate college to pay back your loan and accumulated interest. Interest will not accumulate while you're still attending school. The amount you are lent depends on your financial needs, and the interest rates are usually relatively low.
Unsubsidized Loan: This loan is for undergraduate, graduate, and professional degree students. The maximum you can borrow is $20,500. Interest rates are normally lower for undergraduate students, and higher for graduate and professional degree students. Interest on the loan starts to accumulate once you accept the loan, and you are responsible for paying back the full amount.
PLUS Loan: The PLUS Loan loan is for parents of dependent undergraduate students. Through this loan, parents borrow money to pay their child’s tuition. The maximum account you can borrow is the cost of their college attendance. The interest rate varies and your eligibility is based on your parents’ credit score. You are expected to pay the amount back within six months after graduation.
Federal Perkins Loan: This loan is also for undergraduate, graduate, and professional degree students. The maximum you can borrow for undergraduates is $5,500, and for graduate and professional degree students, the maximum you can borrow is $8,000. The amount lent depends on your financial needs, and only some colleges offer this type of loan. The interest rate is relatively low. You are expected to pay the amount back within nine months after graduation.