Student Loans
If you have pursued all state, federal, and institutional aid and still don’t have enough funds for tuition and expenses, you can consider a student loan. These loans for students or their parents must be paid back with interest. There are two options for student loans: federal and private. You should accept federal loans before taking out private loans. By carefully considering these options, you can make informed decisions about financing your education and managing debt effectively after graduation.
Federal loans
These loans are awarded based on financial need and are low-interest. You must complete FAFSA to be eligible for federal loans, which will be part of your school’s financial aid offer.
Below are the most common:
Direct subsidized loans
are for undergraduates with a financial need. If you qualify, the government will pay your interest fees for you while you are in college. Repayments begin 6 months after your graduation or if you drop to part-time.
Direct unsubsidized loans
are the most common type of federal student loan. They’re available to both undergraduate and graduate borrowers but accrue interest while you’re in school. Repayments begin 6 months after your graduation or if you drop to part-time.
Grad PLUS loans
are for graduate and professional students. These loans let you borrow up to the cost of attendance.
Parent PLUS loans
are for parents with dependent undergraduate students. They can borrow as much as they need to cover their student’s college costs. These do require a credit check; a parent can’t have an adverse credit history to qualify. The student’s eligible loan amount will automatically increase if a parent is denied a loan.
Why consider federal loans?
- Fixed interest rate: The interest rate on federal student loans is fixed, stays the same, and is generally lower than that on private loans and credit cards.
- No credit check or co-signer needed: Most federal loans do not require these.
- Deferred repayment: Repayment begins only after you leave college or drop below half-time enrollment.
- Interest subsidy: For subsidized loans, the government pays the interest while you’re in school.
- Flexible repayment options: Federal student loans offer flexible repayment plans and options if you’re having trouble making payments.
- Loan forgiveness programs: Certain jobs may qualify you for federal loan forgiveness under specific conditions.
Private loans
These are loans offered by private lenders like banks or credit unions. Private loans are generally considered a last resort, and you should proceed with caution because they:
- Are harder to get and require credit checks.
- Have higher interest rates
- Do not offer flexible repayment plans if you are struggling to make your payments
- Are not eligible for federal loan forgiveness programs
- Have more immediate consequences for missing payments
Student loan resources 
Loan Simulator >
The federal government’s tool helps you understand repayment scenarios based on your loan amount and potential repayment plans.
Student Loan Affordability Calculator >
From Nerd Wallet, you can identify your career field and learn how much debt is recommended. Rule of Thumb: Borrow no more than 10% of your projected after-tax monthly income in your first year out of school.
Student Loans >
Nerd Wallet has extensive resources for student loans and repayment.
