The best student loans to get are federal education loans, as they have the lowest interest rates and the most flexible repayment terms when compared to their private loan counterparts.
Because federal loans are vastly superior to most private student loans, I recommend to students that they only apply for private loans after they have exhausted their options in terms of federal aid.
We can use the following criteria when evaluating a particular student loan:
- Interest rate, fees, and other finance charges
- Available loan amount
- Approval criteria
- Repayment Benefits
Private student loans beat federal loans in only one category—available loan amount. Most federal education loans are capped off with regard to a student’s level of degree progress, while most private college loans can be provided up to the cost of attendance on a yearly basis.
Other than that, federal student loans beat most private loans hands-down in the three remaining criteria. They typically have much lower interest rates, less finance charges, a much larger amount of repayment benefits, and approval criteria that is based on need, instead of credit.
There are four major categories of federal student loans:
- Subsidized Stafford Loans
- Unsubsidized Stafford Loans
- Perkins Loans
- PLUS Loans
Subsidized Stafford Loans are of course preferable to get when compared to their unsubsidized counterparts due to the fact that their interest is subsidized while the student is still in school. PLUS loans are parent student loans that must be applied by the student’s parent.
That being said, the best student loans out of this group are clearly the Subsidized Stafford Loan and the Perkins Loan, as these both have extremely low interest rates and an extraordinary amount of repayment benefits that almost any student can take advantage of.
Applying for federal student loans is easy, and can be done with the submission of the FAFSA. Just keep in mind that only a select number of schools participate in the Perkins Loan Program, and ultimately these types of loans are very difficult to get.
Most students who apply for federal aid who have a significant level of need will end up receiving a variety of Subsidized, and Unsubsidized Stafford Loans, which in the end can total upwards of ten thousand dollars per year if the student is still considered to be an undergraduate, and upwards of twenty thousand dollars if the student is enrolled in a graduate program.
