So it's time to pay for school and you've explored and exhausted all grant, scholarship and employment opportunities, right?  Now lets take a look at another resource - The Student Loan.  A student loan works just as it sounds, a loan provided to a student for educational expenses which MUST be repaid.

There are several loan options available for both students and parents.  Here's a quick breakdown of the most popular types of student loan options:

Stafford Loans

The main federal student loan is the Stafford Loan. There are two types:

Subsidized: For students who demonstrate a financial need, the federal government pays all interest costs while they are in school, and during their grace and deferment periods. Repayment begins six months after graduation.

Unsubsidized: Students who do not demonstrate a financial needs test or who need to supplement their subsidized loans may receive unsubsidized Stafford Loans. Although borrowers may defer payment of interest during school, grace, and deferment periods, they are responsible for paying all interest that accrues. As with subsidized loans, borrowers have a six-month grace period following graduation before repayment is required.

Federal Plus Loan

The Parent Loan for Undergraduate Students (PLUS) is a low-interest loan designed to help parents pay for their children's undergraduate education. Parents of an eligible undergraduate student who is enrolled at least half-time, and who meets the borrower eligibility criteria for a Federal PLUS loan may apply.

Although the maximum amount an eligible parent can apply for each academic year is the amount noted on the student's Financial Aid Notification (FAN), he/she can choose to apply for an amount lower than what was originally offered. Parents are under no obligation to secure this loan, and are encouraged to only apply for what they feel is necessary, given the family's financial situation.

Grad Plus Loan

Beginning in the 2006-07 academic year, graduate and professional students were eligible to apply for the Grad PLUS loans. Eligible credit-worthy students can borrow up to the cost of education minus other aid received. Best of all, the professional student is the borrower - not the parent. If denied based on adverse credit, borrowers may obtain a credit-worthy endorser who is secondarily responsible for the loan.

Federal Perkins Loan

Federal Perkins loans are low interest (5%) loans for eligible students with exceptional financial need. Your school will act as your lender. Like all student loans, Federal Perkins loan funds may be used only for educational expenses and must be repaid. Your school is required by federal regulations to report the outstanding balance of the loan on an annual basis to national credit bureau agencies.

To apply for a Perkins, you must complete a FAFSA (for the appropriate academic year) and have marked on the FAFSA that you are interested in student loans. The amount you are awarded depends on when you apply, your level of need, and your school's funding appropriation.

Private Loans

Sometimes known as an Alternative Loan, private loans are non government loans that have become increasingly popular as many parents and students find it necessary to bridge the financial gap between education costs and traditional funding sources such as federal loans, grants, and scholarships.

Private loans are credit based and are not awarded by financial need.  Your creditworthiness and ability to repay will determine if you are approved.  These loans were designed to supplement federal loan programs and must be used for educational expenses, including tuition, living expenses, books and other school expenses.

Its important that you exhaust all financial aid options before considering taking out a Private Loan to pay for your education.

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