School Loan Programs

By means of the various school loan programs, students are able to cover all their educational expenses very smartly and effectively.

There are various school loan programs one can opt for depending upon the need as well as the qualification requirements for that particular school loan program.

Types of school loan programs:

There are two types of loan programs available for school students. They are as follow:

1. Federal Loans.
2. Private Loans.

1. Federal loans: These loans supply financial help to students enrolled at a school that participates in federal aid programs. It incorporates two types of financial support programs which are:
   a. Federal Family Education Loan Program (FFELP): These loans are provided by private companies such as banks, credit unions and savings and loan associations. These loans are guaranteed against default by the federal government.
   b. Federal Direct Student Loan Program (FDSLP): These loans are administered by ‘Direct Lending Schools’, and are provided directly by the government to the students and their parents.

   Other types of Federal Loans:

   • Federal Stafford Loan.
   • Parent PLUS Loan.
   • Graduate PLUS Loan.
   • Perkins Loan.
2. Federal Stafford Loan: Stafford Loans are federal student loans that are directly available to students and are used to supplement personal and family resources, scholarships, grants, and work-study. They may be subsidized or unsubsidized depending on the student's financial needs.
   

   I. Subsidized School loans: In this type of school loan, the government pays off the loan’s interest when the individual is still enrolled in the school. In order to avail subsidized school loan, the individual should be able to show that he or she needs financial help.

   Two-third of the subsidized federal school loans is rewarded to students whose family earns Adjusted Gross Income (AGI) under $50,000 per annum. One-fourth goes to students with family AGI ranging from $50,000-$100,000 per annum. A little less than 10% is awarded to students whose family’s AGI is over $100,000 per annum.

   II. Unsubsidized School Loan Government: Unsubsidized school loan government is different from subsidized school loan government in a way that the student has to pay the loan’s interest that accumulates from the time of disbursement till the time of repayments.

3. Parent PLUS Loan: Parent PLUS Loans enable parents with good credit histories to borrow money in order to afford their child’s educational expenses. The child must be a dependent undergraduate student enrolled at least for half-time in an approved school, college or university.
4. Graduate PLUS Loan: The Graduate PLUS Loan can be used to pay for the total cost of education. Also, the undergraduate eligibility for the Graduate PLUS Loan depends upon the borrower's credit rating and history, as opposed to the purely need-based Graduate Stafford Loan.
5. Perkins Loan: This type of loan is awarded to undergraduate and graduate students who are in dire need of finance. This is a campus-based loan program, as the school is the lender having limited funds which are provided by the federal government. The amount of Perkins Loan is determined by the school's financial aid office.

Private loans:

These loans are also called alternative loans as they are provided by the commercial lenders. Moreover, they are not based on need, so the federal loan eligibility criterion does not work under this loan program. In fact, the eligibility rather depends upon your credit score. Under this program, you can avail a loan amount higher than what federal loan is able to provide you.

Moreover, if you do not qualify for federal school loan, you can always go for private loans. Private loans are there to bridge the gap between school life expenses and the funds that are available.