Types Of Student Loans To Choose From
As college is becoming more expensive, it is more likely that you will have to take out at least one student loan, if not more. When applying for student loans, there are two main categories of student loans that a person can apply for. Most people apply for a federal student loan, which is lent out through the government and processed on a financial basis.
However, not every student will be eligible for these student loans. In those cases, the student still has the option to apply for a private student loan. While both types of student loans will pay for college, there are several differences between the two loan types that make each one unique. A federal student loan is the most common of the student loans that you would apply for. In order to be considered for a federal student loan, you have to go through the process of filling out a FAFSA application. This application gets sent to the Department of Education, where it is filed. Shortly after that, you will be asked to get a student aid report. Because FAFSA is done so early, a lot of the information is still incomplete. This form asks for more information on your tax information, and schooling information. Once the report is returned, the department can process the application and determine what the best options are for you.
With a private student loan, the process is handled by individual student loan lender instead of through the government. Because a private student loan is private, it is up to the lender to decide if they will require a credit report. You do not have to go through the FAFSA process and you will likely get results much quicker. A private student loan generally has higher interest rates because they are not backed by the government. The lender is taking all financial responsibility for your loans, which presents a higher risk.
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