US college student loans explained: what are they and which is right for you?

Posted 5 months ago

With so many different types of student loans and varying requirements including eligibility, interest rates, and maximum borrowing amounts, how do you choose the right one for you and your family?

Students are also heavily dependent on where you’re from. International students are not eligible for the USA government aid programs (Pell Grant, SEOG Grant, Stafford Loan, Perkins Loan, PLUS Loan, and Federal Work-Study). However, many schools will ask international students to submit a FAFSA so that they may use the data for assessing financial need.

If you decide to take on a loan, it’s important to understand how much debt you can take on before signing.

All the loans listed below are for US students only… however there are other various options for international students for financial aid. This includes:

Online scholarships

Research scholarships and financial aid options online. IEFA and International Scholarships deliver a comprehensive list of scholarships available to non-American students.

Your home country

Some countries offer funding for university through organizations or companies.

International Organizations

International organizations such as the Fulbright Commission, who grant aid to students for college as well as The United Nations, AMIDEAST, World Council of Churches, Soros Foundation, World Health Organization. Many of these organizations require you to be in your home country when you apply.

US universities

Many US colleges offer limited financial aid for international aid through their financial aid offices. It’s best to check with your university’s financial aid page on their website for further information on what is offered.

US governments

International students are not eligible for US federal aid/ However, there may be other sources of funding so check with the US embassy in your home country.

International student loans

International students are eligible for private international loans to study in the US. There are specific requirements.

Federal Student Loans

FAFSA can be a long and confusing process, applying for scholarships and lining up work-study of part-time job opportunities. It’s important to note that federal student loans are different from private loans:

  1. Interest rates are generally lower and always fixed
  2. Credit checks and cosigners are unnecessary
  3. Flexible payments and loan forgiveness program plans are available

Direct subsidized federal loans

Also known as stafford loans, can be subsidized or unsubsidized. 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. Eligible undergrad students must demonstrate financial need to benefit from this. The schools you’ve been accepted to will detail the amount you can borrow.

Interest rate: 3.76% for undergads, 5.31% for postgrads Max borrowed: $5,500 to $12,500 for undergrads, $20,500 for grads Loan fee: 1.069% Terms: 10-25 years

Direct unsubsidized federal loans

The unsubsidized version is also accessible to graduate and professional students. This loan is not based on financial need or merit. Almost anyone can be eligible for this loan, as long as they’re enrolled at least half-time in school. For this loan, the interest capitalizes when it goes unpaid, adding to the principal of the original loan amount.

Interest rate: 3.76% for undergrads, 5.31% for postgrads Max borrowed: $5,500 to $12,500 for undergrads, $20,500 for grads Loan fee: 1.069% Terms: 10-25 years

Direct PLUS loans

Plus loans require the applicant to undergo a credit check. It was designed specifically for graduate and professional students who have more time to prove their credit score. To qualify, a bad credit history can be helped by an endorser. Borrowers are given six months after they finish school to make payments.

Interest rate: 6.31% Max borrowed: The cost of attendance minus any other financial aid Loan fee: 4.276% Terms: 10-25 years

Parent PLUS loans

This loan is for biological, adoptive, and step parents to support dependent graduates. One key difference between the Parent PLUS loans and other loans is that parents are expected to make payments while their child is in school. Parent PLUS loans cannot be transferred from parent to student.

Interest rate: 6.31% Max borrowed: The cost of attendance minus any other financial aid Loan fee: 4.276% Terms: 10-25 years

Direct consolidation loans

Consolidating any of the federal loan types above allows graduates to pool multiple loans into a single loan with a single loan servicer, making a single monthly payment. This would also likely be lower than your past loans as the payment period can be extended up to 20 years. Before consolidating, it’s important to consider your own situation.

Interest rate: The weighted average of the interest rate on your existing loan Max borrowed: The cost of attendance minus any other financial aid Loan fee: n/a Terms: up to 30 years

Private student loans

Private lenders provide student loan options as customizable to your financial situation, while positioning the federal government’s as one-size-fits-all. The following 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.

Crimson Education has helped secure $68M USD worth of financial aid and scholarships for students around the world. To learn more about our services and how we can help you gain admission to your dream unviersity, visit our website.

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