{"id":22636,"date":"2025-12-16T23:14:30","date_gmt":"2025-12-16T23:14:30","guid":{"rendered":"https:\/\/budgetadirect.com\/?p=22636"},"modified":"2025-12-16T23:14:35","modified_gmt":"2025-12-16T23:14:35","slug":"types-of-student-loans-how-to-choose-one","status":"publish","type":"post","link":"https:\/\/budgetadirect.com\/?p=22636","title":{"rendered":"Types Of Student Loans &#038; How To Choose One"},"content":{"rendered":"<div xmlns:default=\"http:\/\/www.w3.org\/2000\/svg\">\n<div id=\"block_f204818879e7f6a0142359289e4117c9\" class=\"key-takeaways sm:border-l-4 border-(--accent) sm:pl-8 my-8 relative\" style=\"--accent: var(--color-blue-medium)\">\n    <!-- htmlmin:ignore --><\/p>\n<h2 class=\"heading-4 mt-0 mb-4 text-crop-none max-sm:flex max-sm:items-center max-sm:gap-4\" id=\"key-takeaways\" data-position=\"0\" data-beam-element-viewed=\"\" data-id=\"br-h2-0-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"Key takeaways\" data-outcome=\"\">\n    <span class=\"shrink-0\">Key takeaways<\/span><br \/>\n        <span class=\"max-sm:h-0.5 max-sm:w-full max-sm:w-full max-sm:bg-(--accent) max-sm:rounded-full max-sm:block\"\/><br \/>\n    <\/h2>\n<p>    <!-- htmlmin:ignore --><\/p>\n<ul class=\"flex flex-col text-gray-700 mb-0 gap-2 list-disc\">\n<li class=\"pl-4 relative marker:text-(--accent)\">\n                                                            There are two main types of student loans: federal and private.\n                                                <\/li>\n<li class=\"pl-4 relative marker:text-(--accent)\">\n                                                            Federal student loans are easier to qualify for and have more flexible repayment options than private loans, including far more paths to loan forgiveness.\n                                                <\/li>\n<li class=\"pl-4 relative marker:text-(--accent)\">\n                                                            Private student loans may offer lower interest rates with higher loan limits for borrowers (and cosigners) with excellent credit.\n                                                <\/li>\n<li class=\"pl-4 relative marker:text-(--accent)\">\n                                                            Most advisors suggest maximizing your federal loan allotment before using private loans.\n                                                <\/li>\n<\/ul>\n<\/div>\n<p>There are many types of student loans for many types of students (and parents). <\/p>\n<p>Virtually all student loans fall into one of two buckets: federal or private. The right option will depend on factors like the program you\u2019re attending or personal criteria like your credit.<\/p>\n<p>Federal loans, lent by the Department of Education, are one-size-fits-all and accessible to most families. Private loans are offered by banks, credit unions, online companies and some state agencies \u2014 but only if you (or your cosigner) can qualify. With strong credit, you might get a lower interest rate on a private loan, but federal loans have far more flexibility in terms of repayment and forgiveness.<\/p>\n<h2 id=\"types\" data-position=\"1\" data-beam-element-viewed=\"\" data-id=\"br-h2-1-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"Student loan types: Federal and private\" data-outcome=\"\">Student loan types: Federal and private<\/h2>\n<p>There are several different financing options to choose from within the federal and private student loan categories. For federal loans, keep an eye on the repayment terms and loan limit adjustments each year you\u2019re in school. The rates are set annually by Congress and are the same regardless of your credit.<\/p>\n<p>Private student loans offer a broader range of APRs and loan amounts with stricter qualifying requirements.<\/p>\n<div class=\"w-full overflow-x-auto\">\n<table class=\"wp-block-table Table Table--stripedOdd Table--spacing1 align-middle has-fixed-layout wrapped\">\n<tbody>\n<tr>\n<td>\u00a0<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\"><strong>Direct Subsidized loans (2025-26)<\/strong><\/td>\n<td class=\"has-text-align-left\" data-align=\"left\"><strong>Direct Unsubsidized <strong>loans <\/strong>(2025-26)<\/strong><\/td>\n<td class=\"has-text-align-left\" data-align=\"left\"><strong>Direct PLUS loans (2025-26)<\/strong><\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">\n<strong>Private student loan<\/strong>s<\/td>\n<\/tr>\n<tr>\n<td><strong>Best for<\/strong><\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">Undergraduate borrowers from low-income families<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">Borrowers who don\u2019t qualify for need-based aid<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">Graduate students who have maxed out unsubsidized loans and parents of current students<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">Borrowers who have maxed out federal loans or those with excellent credit<\/td>\n<\/tr>\n<tr>\n<td><strong>Interest rate<\/strong><\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">6.39%<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">6.39% (undergraduate students); 7.94% (graduate students)<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">8.94% <\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">2.85% to 17.99%<\/td>\n<\/tr>\n<tr>\n<td><strong>Loan fees<\/strong><\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">1.057%<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">1.057%<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">4.228%<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">Varies by lender<\/td>\n<\/tr>\n<tr>\n<td><strong>Repayment term<\/strong><\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">10 to 30 years<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">10 to 30 years<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">10 to 30 years<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">5 to 25 years<\/td>\n<\/tr>\n<tr>\n<td><strong>Eligible borrowers<\/strong><\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">Undergraduates with financial need; borrower must be a U.S. citizen or permanent resident and meet other eligibility criteria<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">Undergraduates and graduates; borrower must be a U.S. citizen or permanent resident and meet other eligibility criteria<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">Graduates and parents; borrower must be a U.S. citizen or permanent resident and meet other eligibility criteria<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">Undergraduates, graduates and parents; borrowers must have good credit and a steady income<\/td>\n<\/tr>\n<tr>\n<td><strong>Annual loan limits<\/strong><\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">$3,500 to $5,500 <\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">$5,500 to $7,500 (undergraduate students); $20,500 (graduate and professional students)<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">Up to the cost of attendance minus any other financial aid received<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">Varies by lender<\/td>\n<\/tr>\n<tr>\n<td><strong>Aggregate loan limits<\/strong><\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">$23,000<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">$31,000 (dependent students); $57,500 (independent students); $138,500 (graduate and professional students)<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">Up to the cost of attendance minus any other financial aid received<\/td>\n<td class=\"has-text-align-left\" data-align=\"left\">Varies by lender<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<h2 id=\"federal\" data-position=\"2\" data-beam-element-viewed=\"\" data-id=\"br-h2-2-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"Types of federal student loans\" data-outcome=\"\">Types of federal student loans<\/h2>\n<p>Most students apply for federal student loans over private loans because they\u2019re the easiest to get approved for and offer a wide range of protections that private student loans lack. Federal loans don\u2019t have a minimum credit score requirement, so younger borrowers can access them without a cosigner.\u00a0<\/p>\n<section class=\"editorial-insight-box --insight-box +mg-vertical-md\" data-template=\"insight_box\">\n<div class=\"card-body border-l-4 border-blue-800\">\n<div class=\"content-wrapper\">\n<p>\n                    How to get federal student loans\n                <\/p>\n<div class=\"content wysiwyg wysiwyg--flush\">\n<p>You must complete the Free Application for Federal Student Aid (FAFSA) application to determine how much federal aid you\u2019re eligible to receive, including federal student loans.<\/p>\n<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<\/section>\n<p>Rates are the same regardless of your credit history, but every federal loan requires an origination fee. You won\u2019t find any refinance options with federal loans, although they can be consolidated for a slight increase in your rate.<\/p>\n<p>Federal loans also offer flexible repayment options, including income-driven repayment, with built-in hardship protection that most private loan programs can\u2019t match. Plus, they\u2019re the most-trodden avenue for loan forgiveness programs.<\/p>\n<p>The federal Direct Loan Program offers a few options for students and parents.<\/p>\n<h3>Direct subsidized loans<\/h3>\n<p>Direct subsidized loans are available to undergraduate students who have demonstrated financial need. After filling out the FAFSA, you\u2019ll receive a financial aid offer letter from each of the schools you were accepted into. This letter outlines whether or not you\u2019re eligible for subsidized loans, and for how much. Your offer will vary from school to school based on the cost of attendance and any institutional financial aid you receive.<\/p>\n<p>As an undergraduate, only a portion of your federal loan allotment is earmarked for subsidized loans. For example, for first-year students, no more than $3,500 of the $5,500 in federal loans can be subsidized, and only if you qualify.<\/p>\n<p>In terms of repayment, these loans do not accrue interest while you\u2019re in school, during the six-month grace period or through any deferment period afterward. That\u2019s the primary reason why subsidized loans, if offered, should be your first priority among federal loan types.<\/p>\n<h3>Direct unsubsidized loans<\/h3>\n<p>Direct unsubsidized loans are available to undergraduate, graduate and professional students. You don\u2019t need to demonstrate financial need and can borrow significantly more than a subsidized loan, although it also requires that you fill out the FAFSA.<\/p>\n<p>The key difference between subsidized and unsubsidized loans is that unsubsidized loans accrue interest immediately. This means that you\u2019ll be charged interest on the balance you owe while you\u2019re in school, after graduation and during periods of deferment and forbearance. Making in-school payments, even small ones, and keeping pace with monthly payments after leaving school is critical to avoid the effects of interest capitalization.<\/p>\n<h3>Direct PLUS loans<\/h3>\n<p>Direct PLUS Loans are available to two distinct types of borrowers: <\/p>\n<ol class=\"wp-block-list\">\n<li>\n<strong>Parent PLUS <\/strong>for the parents or guardians of dependent undergraduates.<\/li>\n<li>\n<strong>Grad PLUS <\/strong>for graduate or professional students.<\/li>\n<\/ol>\n<p>Direct PLUS Loans have higher interest rates and loan origination fees than Direct Subsidized and Unsubsidized Loans. <\/p>\n<p>The 2025-2026 school year is the last year in which new federal loan borrowers can access both types of PLUS loans. Parents who want or need to borrow on behalf of their student will soon have to resort to private student loans. And graduate and professional students will be restricted to borrowing unsubsidized loans at new, higher limits or opt for private funding.\u00a0<\/p>\n<div class=\"InlineCta not-wysiwyg my-12\">\n<div class=\"InlineCta-body\">\n                    <!-- htmlmin:ignore --><\/p>\n<h3 class=\"InlineCta-title\">\n    New federal loan borrowing limits are almost here<br \/>\n    <\/h3>\n<p>    <!-- htmlmin:ignore --><\/p>\n<p class=\"InlineCta-copy\">Since President Trump\u2019s Big Beautiful Bill (BBB) will lower federal loan limits effective July 1, 2026, will colleges and universities finally blink and lower tuition prices?<\/p>\n<p>        Learn more<\/p><\/div>\n<\/div>\n<h2 id=\"private\" data-position=\"3\" data-beam-element-viewed=\"\" data-id=\"br-h2-3-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"Types of private student loans\" data-outcome=\"\">Types of private student loans<\/h2>\n<p>Federal student loans offer only fixed rates, while private student loans can have fixed or variable interest rates. Qualified borrowers may receive rates well below those provided by federal loans, and you can potentially borrow more from a bank, credit union or other lender.<\/p>\n<p>There are several types of private student loans, including undergraduate, graduate and parent loans. Because they are funded by a private entity, none of them feature the kind of repayment safety net afforded to federal loan borrowers. In fact, even banks that offer an economic hardship forbearance usually do so on a case-by-case basis \u2014 there are no set criteria where forbearance is guaranteed. Because of this, try to exhaust your federal financial aid options before considering privately-lent education debt.<\/p>\n<h3>Undergraduate loans<\/h3>\n<p>Undergraduate private student loans often come with a wide range of repayment terms and maximum loan amounts. Rather than setting a borrowing cap, some lenders offer loans as large as the full cost of attendance, minus any other financial aid you\u2019ve received. Private lenders may also offer perks like discounts on your principal upon graduation or for academic performance.<\/p>\n<p>However, unlike federal student loans, you\u2019ll have to qualify for the loan based on a review of your credit and income. Private loans almost always require a <u>cosigner<\/u> since undergraduates have typically not had time to develop a credit history.<\/p>\n<p>If private student loan rates drop after you\u2019ve left school, many lenders offer refinance options that could save you money if you qualify.<\/p>\n<section class=\"editorial-insight-box --insight-box +mg-vertical-md\" data-template=\"insight_box\">\n<div class=\"card-body border-l-4 border-blue-800\">\n<div class=\"content-wrapper\">\n<p>\n                    Private student loans for parents\n                <\/p>\n<div class=\"content wysiwyg wysiwyg--flush\">\n<p>If you have good credit, a private loan may be less costly than a Parent PLUS loan. Like other private loans, interest rates can be fixed or variable. However, repayment may begin immediately.<\/p>\n<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<\/section>\n<h3>Graduate loans<\/h3>\n<p>Private student loan lenders may offer specific loan options tailored to graduate, law, medical and business school students. These loans are less likely to require a cosigner than undergraduate loans, though a creditworthy co-applicant could net you a lower interest rate.<\/p>\n<p>In many cases, private graduate student loans also come with benefits specific to a graduate school student\u2019s needs. That may include long grace periods, in-school deferment periods and additional deferment while students complete a residency.<\/p>\n<h2 id=\"choose\" data-position=\"4\" data-beam-element-viewed=\"\" data-id=\"br-h2-4-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"How to choose the right type of student loan\" data-outcome=\"\">How to choose the right type of student loan<\/h2>\n<p>For most students and families, federal student loans are the right type of student loan to prioritize, given their competitive interest rates and best-in-class repayment options.<\/p>\n<p>However, you might be in the minority who could benefit from a private loan, either because you\u2019re a very strong applicant or because you\u2019ve maxed out your federal aid allotment. In these cases, comparison-shopping among private lenders is critical to both getting the best loan possible and understanding what you\u2019re borrowing.<\/p>\n<p>As you seek out the best private lender and loan, consider these criteria:<\/p>\n<ul class=\"wp-block-list\">\n<li>\n<strong>Repayment: <\/strong>Whether you want to make full or interest-only payments in school or defer all payments until after graduation, make sure your lender offers the option you want. Some also allow you to choose different term lengths so you can tailor your payment to your budget.<\/li>\n<li>\n<strong>Cosigner release: <\/strong>If you need a cosigner (either because the lender requires it or because of your credit rating), determine whether it offers cosigner release. A release lets you remove your cosigner from the loan after you\u2019ve made a specific number of on-time payments. The minimum payment period could be as little as six months or as long as four years \u2014 if the lender offers a release option at all.<\/li>\n<li>\n<strong>Discounts:<\/strong> Many lenders offer a small APR discount if you sign up for automatic payments. Others may offer incentives for borrowers who have another financial product with them, submit referrals or graduate on time.<\/li>\n<li>\n<strong>Fees: <\/strong>Origination fees can add up, especially if you borrow tens of thousands of dollars over several years. If you qualify for private loans, avoid lenders that charge this fee.<\/li>\n<li>\n<strong>Hardship programs: <\/strong>Unlike federal student loans, not all private loans come with the option to pause or postpone payments if you have a financial setback. Test lenders\u2019 customer support by asking about their programs\u2019 availability and eligibility.<\/li>\n<li>\n<strong>Lender reviews:<\/strong> Experts and fellow borrowers\u2019 experiences may alert you to any issues with the lender, like difficulties processing payments or slow service representative communication. You can see what other students think of different lenders by checking out their Better Business Bureau rating or reading in-depth reviews on our student loan review page.<\/li>\n<\/ul>\n<h2 data-position=\"5\" data-beam-element-viewed=\"\" data-id=\"br-h2-5-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"Bottom line\" data-outcome=\"\">Bottom line<\/h2>\n<p>Every student should complete the FAFSA, even if you don\u2019t expect to qualify or think you\u2019ll need to borrow. This can help you develop the rest of your game plan for borrowing money from other sources.<\/p>\n<p>If private student loans are needed \u2014 perhaps because your federal aid amount isn\u2019t enough to cover the full cost of attendance \u2014 compare several lenders by visiting their websites. You can also take a look at best student loan rates on a marketplace site like Bankrate before applying to get a student loan.<\/p>\n<div class=\"HelpfulCTA mx-auto flex flex-col items-center gap-6 my-6 py-12 text-base border-y border-gray-200\" data-helpful-cta=\"\" data-beam-element-viewed=\"\" id=\"did-you-find-this-helpful\" data-type=\"cta\" data-location=\"article-bottom\" data-position=\"banner\" data-text=\"Did you find this page helpful?\">\n<div class=\"HelpfulCTA-initial w-full flex flex-col items-center gap-4\" data-cta-initial=\"\">\n<div class=\"HelpfulCTA-question text-lg font-bold text-center text-gray-900\">\n            Did you find this page helpful?<\/p>\n<div id=\"H6Iu8CnXuV\" class=\"hidden\">\n<div class=\"wysiwyg wysiwyg--sm wysiwyg--flush max-w-xs\">\n<p class=\"mb-6 text-base\">\n                            <strong class=\"block font-bold text-gray-900\">Why we ask for feedback<\/strong><br \/>\n                            Your feedback helps us improve our content and services. 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4.175c-.28-.14-.41-.215-.56-.27a1.796 1.796 0 0 0-.344-.085c-.151-.022-.313-.01-.625-.022H7.503Zm11.596.001c-.625 0-1.077 0-1.228.076a.72.72 0 0 0-.323.322c-.075.15-.075.603-.075 1.226v7.68c0 .623 0 1.075.075 1.226.075.14.183.247.323.322.15.075.603.075 1.228.075h.16c.625 0 1.078 0 1.228-.075a.778.778 0 0 0 .324-.322c.075-.151.075-.603.075-1.227V5.423c0-.623 0-1.076-.075-1.226a.722.722 0 0 0-.324-.322c-.15-.076-.603-.076-1.227-.076h-.161Z\" class=\"icon-base\"\/><\/default:svg><\/span> <span class=\"text-base leading-4\">No<\/span><br \/>\n            <\/button>\n        <\/div>\n<\/p><\/div>\n<p>    <!-- Yes Form --><\/p>\n<p>    <!-- No Form --><\/p>\n<div class=\"HelpfulCTA-thankyou flex flex-col items-center gap-2\" data-cta-thankyou=\"\" style=\"display:none;\">\n<p>Thank you for your<br \/>\n            feedback!<\/p>\n<p>Your input helps us improve our<br \/>\n            content and services.<\/p>\n<\/p><\/div>\n<\/div><\/div>\n<p>Read the full article <a href=\"https:\/\/www.bankrate.com\/loans\/student-loans\/types-of-student-loans\/\" target=\"_blank\" rel=\"noopener\" rel=\"nofollow\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Key takeaways There are two main types of student loans: federal and private. Federal student loans are easier to qualify for and have more flexible repayment options than private loans, including far more paths to loan forgiveness. Private student loans may offer lower interest rates with higher loan limits for borrowers (and cosigners) with excellent<\/p>\n","protected":false},"author":1,"featured_media":22637,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[58],"tags":[],"class_list":{"0":"post-22636","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-homes"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.2 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Types Of Student Loans &amp; How To Choose One | BudgetADirect<\/title>\n<meta name=\"description\" content=\"Key takeaways There are two main types of student loans: federal and private. 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