Student loans

As you consider your options and review your financial aid package, chances are you’ll explore the possibility of a student loan — the most widely used form of financial assistance.

Unlike grants and scholarships, student loans have to be paid back. But because the value of higher education is so widely recognized, the federal government gives you a break on the loans it guarantees.

First, the government makes student loans very easy to qualify for. Basically, any currently enrolled college student can get one. Second, many student loans are subsidized, meaning they’re interest-free while you’re enrolled in school. And even unsubsidized student loans come with relatively low fixed interest rates compared to alternative, private loans from banks.

All student loans generally have favorable repayment terms. Once you leave school, you’ll usually get a grace period to find a job before your loan payments start. If you graduate but go back for more school or experience financial hardship, you can often defer, or delay, your student loan payments. And most student loan payments can be stretched out for as many as 10 years. In fact, even though student loans are a form of debt, using them for your education is considered a solid investment in your future.

When you start learning about student loans, you’ll hear some different names tossed around. That’s because there are several types of student loans, each a little different from the others:

• Perkins loans: These subsidized loans come with a fixed interest rate and deferred repayment until nine months after you finish or leave school. Borrowing limits are up to $5,000 per year, or $20,000 as an undergraduate.

• Stafford loans: These loans can be subsidized or unsubsidized, depending on your financial need. You can borrow varying amounts each year, up to the undergraduate cap. Interest rates are capped. Repayment is deferred until six months after you graduate.

• PLUS loans: These college loans — which don’t usually allow deferred repayment — are actually made to your parents, not you (in fact, “PLUS” stands for Parents’ Loans for Undergraduate Students). Interest rates are fixed.