Paying for College

Student Loans

A loan is a contract to borrow money and repay it over time, with interest. Common loan sources include:

  • Subsidized direct loans are for students who have demonstrated financial need. These are better to apply for than unsubsidized direct loans because the government pays the interest on the loan while you're in school as well as during grace periods and deferments for financial hardship or other reasons.
  • Unsubsidized direct loans are not based on financial need. With unsubsidized loans, you are responsible for paying the interest from day one. If you aren't likely to qualify for a needs-based loan or need money beyond what subsidized loans will offer, you may want to consider applying for an unsubsidized direct loan. This is preferable to a private loan for a number of reasons.
    • No credit check or collateral is required.
    • The interest rate is usually lower than that of private loans.
    • The interest rate is fixed, unlike private loans, which could change at any time.
    • There is no need for a parent or other co-signer.
    • It is usually easier to arrange for deferments and flexible repayment plans than it would be with a private loan.
  • PLUS loans allow parents of dependent, graduate, and professional students to borrow the total cost of undergraduate education (tuition, room and board, and other eligible school expenses) minus any financial aid the child is receiving in their name. PLUS loans have a fixed interest rate so the monthly payments remain steady. Many local banks and credit unions offer student loans with variable interest rates.

    To apply for subsidized, unsubsidized, and PLUS loans, fill out the Free Application for Federal Student Aid (FAFSA).
  • Private loans are available through many local banks and credit unions. They are intended to supplement federal student. These loans usually have a variable interest rates so the monthly payment is likely to increase over time. If you think you may need a private loan, talk with a counselor at your school's financial aid office to learn what to ask and how to compare loan options.
Tips on Student Loans
  • Apply for direct loans before applying for private student loans.
  • Private student loans often have more stringent borrowing terms and higher interest rates than federal loans. They should be used as a last resort, particularly for undergraduate students.
  • Compare multiple loan options. Consider the loan's APR (Annual Percentage Rate), which includes all the costs (including interest rates and repayment timelines) associated with the loan.
  • Avoid getting in over your head. Don't borrow more money than what you can pay off in 10 years with 10-15 percent of an entry-level salary in your field.

Understanding Student Loans

If you have already checked into getting scholarships, grants, and other types of financial aid and you still need help paying for college, you may want to consider applying for a loan. A loan is an agreement to borrow money and repay it over time, with interest. Before filling out loan applications, learn about the different types of student loans.


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