Student loans are an excellent way to finance an education, so long as they are not the only form of financing. Ideally, a family should use student loans to finance no more than 25% of a student’s education. The two most common types of student loans are:
Plus Loans - stands for Parent Loan for Undergraduate Students, and is a federally backed loan to parents of children in college. With today's historically low rates, this is a great way to help finance your student's education. You can qualify for a PLUS regardless of your income, and there is no collateral requirement or prepayment penalty.
The Stafford Loan Program - is a loan from the federal government to a student. All Stafford Loans are either subsidized, with the government paying the interest on the loan while the student is still in school, or unsubsidized, in which case the student pays all the interest. However, payments on unsubsidized loans can be deferred until after graduation. A student must show financial need to receive a subsidized Stafford Loan.
Colleges can also give students Federal Perkins loans, which are low interest student loans, given by colleges on the basis of need. It is determined by college financial aid offices who qualifies for Federal Perkins Loans, and the amount of the loan. Colleges that participate are limited in the amount of Perkins loan money they can distribute, so the awards are very selective.
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