Loans Blog

Unless you’re in the lucky bracket where your college tuition is paid for by your parents, grandparents, or you earned a full ride scholarship, student loans are something you need to learn about and learn quickly.

Certainly when you’re applying to colleges, your parents will bring this up or a teacher or counselor. But, honestly, you really have no idea what they’re talking about or where to get the loan or loan information to begin with. You will, inevitably, head to the Internet to find out. But, you’re going to come across a litmus of student loan offerings. Let me make it easier for you. There are two types of loans: federal and private.

Federal loans are loans issued by the government with different sub categories of types of federal loans and come with certain specifications and protections for the student. To elaborate on the sub categories of federal loans, there are three types outlined by the Federal Trade Commission:

• Direct Loans
• Federal Perkins Loans
• Federal Family Education Loans (FFEL)

Direct loans are issued to the individual applying for the loan (you, the student) ‘directly’ from the U.S. Department of Education. Federal Perkins Loans are issued in a similar way but are issued on a ‘need’ basis. This ‘need’ basis takes into consideration parents income and ability to contribute to the individual’s (again, you the student) education. Now the FFEL is similar to direct loans except that the loans are funded through private donors and then the donors receive federal subsidies from the government. All these loans come with interest rates and other information you must learn before taking out any of the loans.

I’ll get into private loans in another installment down the road.