Different Loan Types

There are two major types of college loans that you can getsubsidized and unsubsidized. The difference between them is the interest you will end up paying over the life of the loan.

• Subsidized Loans: Subsidized loans for college have their interest paid for you while you are in school. What this means is that if you borrow $10,000 from the lender while you are in school, when you graduate you will still owe just $10,000. Interest on the loan will begin accruing on the loan after your graduation, however, that you will be responsible for paying. The downside to subsidized loans is that they are usually smaller loan amounts and not available to everyone depending upon your credit score or financial situation.
• Unsubsidized Loans: Unsubsidized loans accrue interest while you are in school which means that depending on the length of time you are receiving your education, you could end up owing substantially more than you borrowed by the time you are required to begin paying back the loan. For example, if you borrow $5,000 in unsubsidized loans in your first semester of school at 5% interest, at the end of your first year of school, you will owe $5,250, and at the end of your second year of school, that will be $5512.50. You can see how quickly even one semester of unsubsidized loans could cost you more than $1,000 more than if you were borrowing on a subsidized loan.

Different Lenders

The largest lender for college education is Sallie Mae, a semi-federal program that offers Stafford loans based upon financial need. In order to qualify for a Stafford Loan, you will have to complete a FAFSA application, which includes disclosing your full tax filing information for the previous years

There are also many private lenders who offer money for college loans on similar terms including some banks and credit unions. Applying for these loans is similar to applying for any other personal loan, though generally the requirements for repayment are less stringent, since your current financial situation does not likely look anything like what your financial situation is expected to be after you graduate from school. There is also extra security for lenders in providing a college loan, because, unlike most other loans, college loans cannot be discharged by a bankruptcy under most circumstances. Check out some of the frequently asked questions about college loans for more information.