Types of student loans and how to choose one

When deciding on a student loan, it's important to understand the two main types: federal and private. Federal loans, provided by the Department of Education, are easier to obtain and offer more flexible repayment options, including forgiveness opportunities. Private loans, on the other hand, may have lower interest rates but require a better credit score and cosigner.

Federal loans come in two main categories: subsidized and unsubsidized. Subsidized loans are for students with financial need and do not accrue interest while in school, during grace periods, or deferment periods. Unsubsidized loans, available to all students regardless of need, begin accruing interest immediately. Parent PLUS loans are available to parents of dependent undergraduates but have higher interest rates and fees.

Private loans can be obtained from banks, credit unions, online companies, and some state agencies. They offer a broader range of APRs and loan amounts but require a stronger credit history and cosigner. Private loans do not have the same forgiveness or forbearance options as federal loans. It's generally recommended to exhaust federal loan options before considering private loans.