Explore your federal options first For most student borrowers, federal Direct loans are the better option. They almost always cost less and are easier to repay. (This may not be the case if you are a parent or graduate student considering federal PLUS loans, though.)
A subsidized loan is your best option. With these loans, the federal government pays the interest charges for you while you're in college. Here are the types of student loans.
Students with unsubsidized loans do not get any breaks and interest starts to accrue as soon as the loan is paid out. Ultimately, it's best to use subsidized student loans if you qualify, as you will pay less over time than with unsubsidized loans.
Federal loans generally have more favorable terms, including flexible repayment options. Students with "exceptional financial need" may qualify for subsidized federal loans, while unsubsidized loans are available regardless of financial need.
Types of federal student loans
While there are many ways to pay for college, federal student loans are one of the most popular options. These loans offer flexible payment options and often have low interest rates. The federal Direct Loan Program offers a few loan types.
What type of student loan has the lowest interest rate? Federal student loans tend to offer the lowest interest rates, and there's no credit check for most federal student loans.
Federal loans — received by submitting the Free Application for Federal Student Aid, or FAFSA — are often the best choice because you don't need a credit history to qualify, and they come with programs, like income-driven repayment plans and loan forgiveness, that private loans don't offer.
If you have federal student loans, they may be either subsidized or unsubsidized loans. It's typically best to focus on your unsubsidized loans first since they accrue interest during school and your grace period.
Unsubsidized student loans are still a good option since they typically offer better rates and terms than private student loans — plus anyone can get an unsubsidized loan, regardless of income.
Some drawbacks of federal direct loans are that there are no subsidized federal direct loans for graduate students, borrowers who default or become otherwise unable to repay their federal direct loans will not be able to escape them by declaring bankruptcy, and undergraduates who apply for direct unsubsidized loans and ...
Among undergraduate and graduate student loan options, federal direct subsidized loans are the cheapest and most flexible.
If you signed up for a Sallie Mae loan when you entered college, you may have a high interest rate because you were a college student with no credit history and no full-time income. If you now have a stable job and a good credit score, you may be eligible for a lower interest rate.
Data Summary. The average federal student loan payment is about $302 for bachelor's and $208 for associate degree-completers. The average monthly repayment for master's degree-holders is about $688.
Private loans carry more risk than federal loans because they don't provide protections like access to income-driven repayment plans, forbearance and deferment options or student loan forgiveness programs.
Sallie Mae is a great option for those interested in borrowing from a well-established lender with low rates, few fees and a variety of loan options. Borrowers with more unique educational needs, like funds for an online certification course, may have more luck finding a loan with Sallie Mae than with similar lenders.
Subsidized Loans are loans for undergraduate students with financial need, as determined by your cost of attendance minus expected family contribution and other financial aid (such as grants or scholarships). Subsidized Loans do not accrue interest while you are in school at least half-time or during deferment periods.
Federal Loans
Student loans made by the federal government are commonly referred to as Direct Loans. There are four types of Direct Loans: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.
Loans made through the Federal Perkins Loan Program, often called Perkins Loans, are low-interest federal student loans for undergraduate and graduate students with exceptional financial need.
Sallie Mae provides private student loans. Federal loans formerly managed by Sallie Mae were moved to other servicers.