Your Guide to Understanding Every Type of Student Loan Available Today

 March 12, 2020
How Student Loan Hero Gets Paid

How Student Loan Hero Gets Paid

Student Loan Hero is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). Student Loan Hero does not include all lenders, savings products, or loan options available in the marketplace.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Student Loan Hero is an advertising-supported comparison service. The site features products from our partners as well as institutions which are not advertising partners. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.

Editorial Note: This content is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the financial institution.

types of student loans
Logo

We’ve got your back! Student Loan Hero is a completely free website 100% focused on helping student loan borrowers get the answers they need. Read more

How do we make money? It’s actually pretty simple. If you choose to check out and become a customer of any of the loan providers featured on our site, we get compensated for sending you their way. This helps pay for our amazing staff of writers (many of which are paying back student loans of their own!).

Bottom line: We’re here for you. So please learn all you can, email us with any questions, and feel free to visit or not visit any of the loan providers on our site. Read less

With so many types of student loans for college, how do you pick the right one?

Even when narrowing your focus to federal student loan options, there are five different options with varying eligibility requirements, interest rates and maximum borrowing amounts.

To help you find your best option, here’s our overview of the eight types of student loans available, both federal and private.

1. Direct subsidized federal loan
2. Direct unsubsidized federal loan
3. Direct Grad PLUS loan
4. Direct Parent PLUS loan
5. Direct Consolidation Loan
6. In-school private loans for students and parents
7. Income-share agreements
8. Refinanced loans for graduates

Consider all the different types of student loans

Types of federal student loans

Filling out the FAFSA, applying for grants and scholarships and lining up work-study or part-time job opportunities are all important precursors to taking out a student loan. Unlike those steps, taking out a loan will require repaying what you borrow, plus interest.

Understand what makes federal student loans unique to private options.

  • Interest rates are generally lower and always fixed.
  • Credit checks and cosigners are mostly unnecessary.
  • Flexible payment plans and loan forgiveness programs may be available.
  • Consolidating multiple federal loans can lower a monthly payment if the repayment plan is extended.

Three more significant considerations about these government-funded loans:

  • Maximum borrowing amounts depend on grade level and dependency status, plus the cost of attendance.
  • Loan servicers are chosen by the federal government or school, which serves as the lender.
  • Paid interest might be more easily tax-deductible (though private loan interest can also be eligible).

The federal loan program is robust and offers many different types of student loans. Though specific eligibility requirements vary, you could qualify for one or more of the following types of federal student loans for college or graduate school.

1. Direct subsidized federal loan

Known historically as Stafford loans, direct subsidized and unsubsidized loans have one significant difference. With subsidized debt, the Department of Education will cover the interest that accrues on your loans while you’re enrolled at least half-time in school.

For example, one year of interest on a $5,500 loan would be $277 for a class of 2019 college freshman. If you qualify for a subsidized loan, the government will foot that bill for you.

Eligible undergraduate students must demonstrate a financial need to benefit from this. The schools to which you’ve been accepted will then detail the amount you can borrow in your college award letter.

Interest rate: 5.05% for undergraduates (for loans disbursed July 1, 2018, to July 1, 2019)
Aggregate loan limit: $23,000 for undergraduates
Loan fee: 1.062% (for loans disbursed Oct. 1, 2018, and Oct. 1, 2019)
Terms: 10 to 25 years

2. Direct unsubsidized federal loan

Unlike subsidized federal loans, the unsubsidized version is also accessible to graduate and professional students, and awarding of the loan is not based on financial need or merit. In other words, almost everyone is eligible for this loan, as long as they’re enrolled at least half-time in school.

With unsubsidized loans, you’re on the hook for accruing interest while you’re enrolled, as well as during a grace period or while in deferment or forbearance. What’s more, the interest capitalizes when it goes unpaid, meaning that it will be added to the principal of the original loan amount.

Interest rate: 5.05% for undergraduates, 6.60% for postgraduates (for loans disbursed July 1, 2018, to July 1, 2019)
Aggregate loan limit: $31,000 to $57,500 (depending on your dependency status) for undergraduates, $138,500 for graduates*
Loan fee: 1.062% (for loans disbursed Oct. 1, 2018, and Oct. 1, 2019)
Terms: 10 to 25 years

*Professional students in healthcare programs may borrow beyond this limit.

3. Direct Grad PLUS loan

PLUS loans, whether they’re for graduate students or parents (see No. 5, below) are unique in that they require the applicant to undergo a credit check. The Direct Grad PLUS loan, specifically, was built for graduate and professional students who have had more time to improve their credit score (unlike undergraduates entering college, who might have never held a credit card).

If you’re trying to qualify for PLUS loans but have an adverse credit history, enlisting a creditworthy endorser can help your case.

Grad PLUS loans also give their borrowers until six months after they finish or leave school to begin making payments.

Interest rate: 7.08% (for loans disbursed July 1, 2019, to July 1, 2020)
Aggregate loan limit: The cost of attendance minus any other financial aid
Loan fee: 4.236% (for loans disbursed Oct. 1, 2019, and Oct. 1, 2020)
Terms: 10 to 25 years

4. Direct Parent PLUS loan

This loan type is for biological, adoptive and stepparents to support their dependent undergraduates.

A key difference between Parent PLUS loans and other types of loans is that parents are expected to make payments while their children are in school, though they may request deferment during the loan application process.

The government does not offer a way for parents to transfer a PLUS loan to their children, but some private lenders do allow you to refinance a Parent PLUS Loan in a child’s name.

Interest rate: 7.08% (for loans disbursed July 1, 2019, to July 1, 2020)
Aggregate loan limit: The cost of attendance minus any other financial aid
Loan fee: 4.236% (for loans disbursed Oct. 1, 2019, and Oct. 1, 2020)
Terms: 10 to 25 years

5. Direct Consolidation Loan

Consolidating any of the federal loan types above allows graduates (or dropouts) to pool multiple loans into a single loan with a single loan servicer. This means you can make a single monthly payment, too.

That payment would also likely be lower than your past loans, as the repayment period can be extended up to 30 years.

Although consolidation is convenient, it’s not right for everyone. It might give one borrower access to income-driven repayment options, but it might erase another’s progress toward Public Service Loan Forgiveness.

Before deciding to consolidate, it’s critical to consider your own situation.

Interest rate: The weighted average of the interest rates on your existing loans
Loan fee: n/a
Terms: Up to 30 years

Types of private student loans

Even some private lenders will tell you to consider taking out federal loans before weighing their own products. This is because of the protections mentioned above that the government affords its borrowers.

Those same private lenders, however, will present their student loan options as customizable to your financial situation, while positioning the federal government’s as one-size-fits-all.

The private loan details that can be personalized:

  • Variable interest rates are offered, in addition to fixed rates.
  • While cosigners are almost always required, a strong credit history can lower your interest rate.
  • Repayment options, from deferment programs to in-school payments, can make your monthly bill more manageable.

When comparing private lenders to federal loan options, ensure that the little details that matter to you aren’t lost. For one borrower, this might be asking about prepayment penalties; for another, repayment protections like forbearance might be crucial.

With that in mind, here are three types of private student loans for college and beyond.

6. In-school loans for students and parents

The beauty of in-school student loans in the private marketplace is that there are many to choose from. Whether you’re a college freshman, a scholar seeking a doctoral degree or are the parent of one — there’s something for everyone. Sallie Mae, for example, offers 13 different education loans, from paying for the private kindergarten of your toddler to financing your study for the bar exam.

But with varying loan types come more choices. Take repayment as one example: College Ave, one of Sallie Mae’s competitors, offers undergraduates four options while they’re in school:

  • Defer payments entirely
  • $25 monthly payments
  • Interest-only payments
  • Full principal-and-interest payments

With this greater degree of decision-making, put private lenders to the test as you’re shopping around. Don’t rely on them to provide every bit of information you need to make a good choice.

7. Income-share agreements

Unlike private student loans, privately-funded income-share agreements (ISAs) are relatively new to the financial aid scene. They also represent a foreign concept to many students, mostly because there are only some schools that offer ISAs.

ISAs have also drawn criticism from government leaders for their lack of regulation. Repayment terms of ISAs vary from those of student loans, yet they can be misunderstood and, like loans, lead to default.

Still, an ISA could be a helpful supplement to, if not supplant, student loans. A handful of companies have sprung up with direct-to-student lending while more schools, and even the Department of Education, consider adding an ISA to the financial aid menu.

8. Refinanced loans for graduates

Whereas the federal government’s Direct Consolidation Loan (see no. 5, above) allows borrowers to combine multiple federal loans into one, private lenders offer the option of refinancing federal and private loans into one new loan.

The key difference here is that consolidating federal loans doesn’t directly save you money; it might actually cost you more, as the repayment term could lengthen.

Refinancing, however, could award you a lower interest rate and could help you save on the total cost of your debt. A solid credit score and steady income may help you qualify for the lowest interest rates.

Private lenders aren’t shy about promoting their average customer’s savings by refinancing. Although that number is important, consider whether you’re the type of borrower who is likely to match that success. It’s especially crucial to proceed with caution if you’re refinancing federal loans and would lose their associated protections and forgiveness programs.

Read up on what to consider before you refinance any of your student loans.

Consider all the different types of student loans

Part of why private loan companies have enjoyed success in lending to students, graduates and parents alike is that they’re able to offer customized loans to creditworthy borrowers. Federal loans, on the other hand, were established to help cash-poor or credit-risky borrowers afford the rising costs of college.

Review all of these student loan types before deciding what’s best for you — and only you.

Want more help comparing your options? Check out some more key differences between federal and private student loans.

Need a student loan?

Here are our top student loan lenders of 2021!
LenderVariable APREligibility 
0.94% – 11.98%1Undergraduate
Graduate

Visit College Ave

1.13% – 11.23%*,2Undergraduate
Graduate

Visit SallieMae

0.99% – 11.44%3Undergraduate
Graduate

Visit Earnest

1.50% – 11.33%4Undergraduate
Graduate

Visit Ascent

0.95% – 11.18%5Undergraduate
Graduate

Visit SoFi

1.03% – 11.01%6Undergraduate
Graduate

VISIT CITIZENS

N/A7Undergraduate
Graduate

Visit FundingU

* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.

1 Important Disclosures for College Ave.

CollegeAve Disclosures

College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

Rates shown are for the College Ave Undergraduate Loan product and include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.

This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. This informational repayment example uses typical loan terms for a first year graduate student borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.10% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $141.66 while in the repayment period, for a total amount of payments of $16,699.21. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

Information advertised valid as of 11/24/2021. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.


2 Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.

3 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.

Earnest Disclosures

  1. Rates include 0.25% Auto Pay Discount
     
  2. Explanation of Rates “With Autopay” (APD)
    Rates shown include 0.25% APR discount when client agrees to make monthly principal and interest payments by automatic electronic payment. Use of autopay is not required to receive an Earnest loan.

    Available Terms
    For Cosigned loans – 5, 7, 10, 12, 15 years. 
    Primary Only – 10, 12, 15 years

    In school deferred payment is not available in AL, AZ, CA, FL, MA, MD, MI, ND, NY, PA, and WA).


4 Important Disclosures for Ascent.

Ascent Disclosures

Ascent loans are funded by Bank of Lake Mills, Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: AscentFunding.com/Ts&Cs.

Rates are effective as of 10/01/2021 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes income-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates.

1% Cash Back Graduation Reward subject to terms and conditions, please visit AscentFunding.com/Cashback. Cosigned Credit-Based Loan student borrowers must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest APRs are available for the most creditworthy applicants and may require a cosigner.


5 Important Disclosures for SoFi.

Sofi Disclosures

UNDERGRADUATE LOANS: Fixed rates from 2.99% to 10.66% annual percentage rate (“APR”) (with autopay), variable rates from 0.95% to 11.18% APR (with autopay). GRADUATE LOANS: Fixed rates from 4.08% to 10.90% APR (with autopay), variable rates from 1.00% to 11.29% APR (with autopay). PARENT LOANS: Fixed rates from 4.23% to 10.66% APR (with autopay), variable rates from 1.15% to 11.18% APR (with autopay). For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. Interest rates for variable rate loans are capped at 13.95%, unless required to be lower to comply with applicable law. Lowest rates are reserved for the most creditworthy borrowers. If approved for a loan, the interest rate offered will depend on your creditworthiness, the repayment option you select, the term and amount of the loan and other factors, and will be within the ranges of rates listed above. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Information current as of 11/01/2021. Enrolling in autopay is not required to receive a loan from SoFi. Loans originated by SoFi Lending Corp. or an affiliate (dba SoFi), licensed by the Department of Financial Protection and Innovation under the California Financing Law License No. 6054612. NMLS #1121636 (www.nmlsconsumeraccess.org).


6 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

Undergraduate Rate Disclosure: Variable interest rates range from 1.03% – 11.01% (1.03% – 10.24% APR). Fixed interest rates range  from 3.23% – 11.70% (3.23% – 10.83% APR).

Graduate Rate Disclosure: Variable interest rates range from 1.89% – 10.66% (1.89% – 10.41% APR). Fixed interest rates range from 4.64% – 11.23% (4.64% – 10.95% APR).

Business/Law Rate Disclosure: Variable interest rates range from 1.89% – 9.22% (1.89% – 8.50% APR). Fixed interest rates range from 4.24% – 9.74% (4.24% – 9.02% APR).

Medical/Dental Rate Disclosure: Variable interest rates range from 1.89% – 8.02% (1.89% – 7.72% APR). Fixed interest rates range  from 4.18% – 8.54% (4.18% – 8.24% APR).

Parent Loan Rate Disclosure: Variable interest rates range from 1.97%-7.06% (1.97%-7.06% APR). Fixed interest rates range from 4.55%-7.58% (4.55%-7.58% APR).

Bar Study Rate Disclosure: Variable interest rates range from 4.44% – 9.58% (4.44% – 9.52% APR). Fixed interest rates range  from 7.39% – 12.94% (7.39% – 12.82% APR).

Medical Residency Rate Disclosure: Variable interest rates range from 3.53% – 7.03% (3.53% – 6.75% APR). Fixed interest rates range from 6.99% – 10.49% (6.97% – 10.08% APR).

Variable Rate Disclosure: Variable Rates advertised are based on the one-month London Interbank  Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business  day, of the preceding calendar month. As of November 1, 2021, the one-month LIBOR rate is 0.09%.  Variable interest rates will fluctuate over the term of the loan with changes in the LIBOR rate, and will  vary based on applicable terms, level of degree and presence of a co-signer. Your final variable rate may  be based upon the 30-day average SOFR index, as published by the Federal Reserve Bank of New York.  The maximum variable rate is the greater of 21.00% or Prime Rate plus 9.00%.

Fixed Rate Disclosure: Fixed rate ranges are based on applicable terms, level of degree, and presence of a co-signer.

Lowest Rate Disclosure: Lowest rates are only available for the most creditworthy applicants, require a  5-year repayment term, immediate repayment, a graduate or medical degree (where applicable), and  include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the  Loyalty Discount and Automatic Payment Discount disclosures. Rates are subject to additional terms and  conditions, and are subject to change at any time without notice. Such changes will only apply to  applications taken after the effective date of change.

Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer.  Borrowers should carefully review federal benefits, especially if they work in public service, are in the military, are considering possible loan forgiveness options, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision on our website including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.

Eligibility Criteria: Applicants must be a U.S. citizen, permanent resident, or eligible non-citizen with a creditworthy U.S. citizen or permanent resident co-signer. For applicants who have not attained the age of majority in their state of residence, a co-signer is required. Citizens Bank reserves the right to modify eligibility criteria at any time. Citizens Bank private student loans are subject to credit qualification, completion of a loan application/Promissory Note, verification of application information, and if applicable, self-certification form, school certification of the loan amount, and student’s enrollment at a Citizens Bank participating school.

Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.

Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.


7 Important Disclosures for Funding U.

Funding U Disclosures

Offered terms are subject to change. Loans are made by Funding University which is a for-profit enterprise. Funding University is not affiliated with the school you are attending or any other learning institution. None of the information contained in Funding University’s website constitutes a recommendation, solicitation or offer by Funding University or its affiliates to buy or sell any securities or other financial instruments or other assets or provide any investment advice or service.