Student loans can be an important component for funding your college education. Learning how to skillfully navigate the process is key! If you’re concerned about loans, stress can be resolved by meeting with a financial aid counselor and becoming educated about the different kinds of loans available.
In this blog post, we’ll run through the different types of student loans available to you, and debunk a few myths and rumors along the way.
The first type of loans to consider are direct subsidized and unsubsidized loans through the Department of Education. With these loans, you don’t need a credit check or cosigner. All you need to do is complete the FAFSA and some additional forms.
So, what’s the difference between the two?
Direct subsidized loans are available only to undergraduate students who demonstrate financial need. The U.S. government pays the interest on subsidized loans (hence the use of the term, subsidized)when the following circumstances are true:
Depending on your classification (First Year, sophomore, Junior, or Senior) that will determine the amount of money you can borrow, but keep in mind subsidized loans also tend to have lower loan limits.
Direct unsubsidized loans are available to both undergraduate and graduate students, and there is no requirement for students to demonstrate financial need.
However, interest does accrue during all periods, and you are responsible for paying that interest.
Once again, your school will determine the amount you are eligible for based on the cost of your attendance and other financial aid you receive.
PLUS loans are also called parent PLUS loans and grad PLUS loans. For these loans, the U.S. Department of Education is the lender, and a credit check is conducted.
For parent PLUS loans, the parent is the borrower. They must be your biological or adoptive parent, and you must be an undergraduate student. Parents will have to make payments on the loan while you’re still in school, unless a deferment is requested.
The amount of money eligible to be borrowed is equal to the cost of attendance minus the amount of aid you’ve already been given.
If a federal student loan still doesn’t cover your costs, you could have the option of private student loans.
Private loans are made by private organizations such as
Private student loans can be more expensive than federal student loans, and the organization can set its terms and conditions.
Most private student loans do require you to begin making payments while you are still in school, but a few do allow you to defer your payments until after you graduate. Private loans also require a credit check and usually a cosigner.
It’s recommended you apply for federal student loans before looking into a private student loan.
If you and your family do decide to borrow money to help cover college expenses, we strongly encourage you to only borrow the amount that is required.
For example, if you have the ability to cover the cost of books, supplies, and other living expenses without borrowing, then adjust your borrowing to cover the costs of tuition, fees, and room & board only. Don’t borrow to cover expenses you can pay for. Borrowing only what you need makes you a responsible borrower.
Financial aid counselors at Meredith are here and ready to help you and your family through the process.
Our counselors take the time to understand your financial situation and encourage you to make the choice that is right for you. This may mean taking out a Parent PLUS Loan, or it may mean having your parent co-sign a private loan. The aid you need from year-to-year may be slightly different, and the counselor is here to help you navigate those differences.
By the end of the conversation with your financial aid counselor, you and your family will have the information you need to make an informed and responsible decision.
The reality is higher education is an investment, and loan debt is often a necessity for many students. Working together with your financial aid counselor can help educate you on the available options for financing the cost of your education.
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