Three major categories of student loans
1. Student loans - These include the Federal Stafford and Federal Perkins Loans.
2. Parent loans - The federal Parent Loan for Undergraduate Students (PLUS) lets parents borrow money to cover any costs not already covered by the student's financial aid package, up to the full cost of attendance.
3. Private Education Loans - Also known as Alternative Education Loans, help bridge the gap between the actual cost of your education and the limited amount the government allows you to borrow in its programs.
Federal Stafford Loan - The Federal Stafford Loan is a need-based program whereby a student borrows money from a commercial lender or other participating organization.
Federal Subsidized Stafford Loan: The Federal Government will pay the interest on these loans until the time repayment begins, which is six months after the student graduates or ceases to be enrolled at least one-half of the normal course load, or when a student withdraws from an institution. A minimum payment of $50 must be made monthly (but may be higher depending on the total amount borrowed). The loan must be repaid within ten years from the date a student is last enrolled in a participating institution.
Federal Unsubsidized Stafford Loans: The Unsubsidized Loan terms and conditions are the same as Federal Subsidized Stafford Loans, such as loan limits, deferments and interest rates with few exceptions. However, students are responsible for any accruing interest during in-school and deferment periods. Interest accruing during those periods may be paid or capitalized as agreed by the borrower and lender. An origination fee of 3% will be deducted proportionately from each installment payment. Lenders may charge up to 1% of the principle amount borrowed for an insurance premium that will also be deducted from each installment payment.
Federal Perkins loan provides limited funds to needy students at very low interest rates. Interest does not begin to accrue until six or nine months after the student graduates or is enrolled on a less than half-time basis depending upon when the loan was first received. Loans must be repaid within ten years with minimum monthly payments of $40 (payments may be more depending on total amount borrowed).
Consolidation Loans (Direct or FFEL) allow the student (or the parents, if they have a PLUS Loan) to combine several types of federal student loans into one loan with one monthly payment.