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If you’re headed off to school, it’s a good idea to learn about the types of student loans you might need first.
In 2017, two-thirds of students who graduated with a bachelor’s degree had to take on debt to pay for school, borrowing $28,500 on average. Graduate and professional students took on even more debt than that, too, so it’s likely you’ll need student loans before finishing your degree.
Here are the major types of student loans you should know about:
- Federal student loans
- Private student loans
- Private student loans can be used to fill in the gaps of federal loans
Federal student loans
A federal student loan is a type of loan that’s backed by the U.S. government. Federal student loans don’t require a credit check but do require you to complete the Free Application for Federal Student Aid, or FAFSA. After you submit the FAFSA, your school’s financial aid office will send you a financial aid award letter, which might include various student loan options. This offer letter is usually the starting point if you want to apply for student loans.
Direct Subsidized Loans
Direct Subsidized Loans are for undergraduate students with financial need. With this type of loan, the government covers the interest while you’re in school and during deferment periods. The current interest rate on subsidized loans is 5.05%. You can borrow up to $23,000 in subsidized loans if you’re a dependent student or $65,500 as an independent student.
Direct Unsubsidized Loans
Both undergraduate and graduate students can qualify for Direct Unsubsidized Loans. With unsubsidized loans, interest accrues while you’re in school. That’s the big difference when it comes to subsidized vs. unsubsidized loans. For undergrads, the interest rate on unsubsidized loans is 5.05%. For graduate and professional students, it’s 6.60%.
Dependent students can borrow up to $31,000 between both subsidized and unsubsidized loans. Independent undergraduate students are limited to $57,000 between both types of loans, while independent graduate students can borrow up to $138,500 in total.
PLUS Loans
Parents and graduate students can take out PLUS Loans. Unlike subsidized and unsubsidized loans, PLUS loans require a credit check.
There are two types of PLUS Loans:
- Grad PLUS Loans are disbursed between Oct. 1, 2019, and Oct. 1, 2020, and charge 4.236% interest.
- Parent PLUS Loans are disbursed from July 1, 2019, to July 1, 2020, and come with 7.08% interest.
With PLUS loans, you can borrow up to the cost of attendance for your school (but this isn’t always a good idea when it comes to paying them back).
Private student loans
If you need more funding beyond federal student loans and scholarships, private student loans could help. They’re available to both undergraduate and graduate students but also require a credit check. If you (or a cosigner) have excellent credit, private student loans might cost you over time less than some federal student loans. Keep in mind that interest rates and loan limits vary depending on the private student loan lender.
Undergraduate student loans
Limits for undergraduate private student loans vary by lender. Interest rates also depend on the lender. Your rate could fluctuate based on your credit history, too.
International student loans
If you live outside of the U.S., you might still be able to get international student loans for your studies at a U.S. college or university. You’ll need to show legal U.S. status to qualify and will likely need a cosigner from the U.S., depending on the lender.
Keep in mind that if you don’t have a credit history in the United States, you might have to pay higher interest rates — or you might struggle to get approved in the first place.
Graduate student loans
Federal student loans don’t always cover the total cost of school. If you need cash between terms or need to borrow more than your financial aid package offers, private student loans could be a good fit. And if you have excellent credit, you might qualify for lower interest rates with graduate student loans than you would with federal student loans (particularly PLUS Loans).
MBA student loans
An MBA can be an investment in your long-term career success — but depending on your school, it can also be quite expensive. Like other private student loans, limits vary for MBA student loans based on your cost of attendance and credit history.
Medical student loans
Medical school can come with a six-figure price tag. If you have a positive credit history, medical student loans could help. You might also consider medical residency loans to cover the costs of your continuing medical education.
Law school loans
Law school is another expensive degree for many students. Law school student loans can help you pay for tuition, fees, textbooks, and other costs. And once you finish your degree, bar exam loans could bridge the financial gap until you land a paying job.
Learn More: Student Loans for Bad Credit
Private student loans can be used to fill in the gaps of federal loans
Federal student loan applications have rigid application deadlines, but you can apply for private student loans at any point in the school year. Private loans could be a good way to cover any education-related costs left over after you’ve exhausted your federal student loan, scholarship, and college savings options. There are also student loans for living expenses available.
If you’re considering PLUS loans, keep in mind that some private student loans might lower have interest rates. Once you factor in origination fees, the annual percentage rate for PLUS loans can be higher than private student loans.
But no matter what type of student loan you choose, take care not to borrow more than you need. You’ll have to pay your student loans back eventually, and smaller loan amounts are much easier to handle.
| Lender | Fixed rates from (APR) | Variable rates from (APR) |
|---|---|---|
 | 5.88%+ | 5.20%+ |
 | 4.40%+1 | 1.95%+1 |
 | 4.31%+2,3 | 2.69%+2,3 |
 | 5.09% - 12.49%6 | 2.15% - 10.37%6 |
 | 4.52%+8 | 3.01%+8 |
 | 4.09%+ | 2.77%+ |
 | 3.95%+ | N/A |
 | 4.74% - 11.85%9 | 2.00% - 10.01%9 |
 | 3.82%7 | 1.77%7 |
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Lowest APRs reflect autopay, loyalty, and interest-only repayment discounts where available | 1Citizens Bank Disclosures | 2,3College Ave Disclosures | 6Discover Disclosures | 7SunTrust Bank Disclosures | 8EDvestinU Disclosures | 9Sallie Mae Disclosures |
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Citizens Bank Student Loan Rate Disclosure Variable rate, based on the one-month London Interbank Offered Rate ("LIBOR") published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 1, 2020, the one-month LIBOR rate is 0.92%. Variable interest rates range from 1.95%-10.28% (1.95%-10.13% APR) and will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 4.40%-12.19% (4.40% - 12.04% APR) based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown requires application with a co- signer, are for eligible applicants, require a 5-year repayment term, borrower making scheduled payments while in school and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of the loan. |
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Compare your student loan rates to make the right choice for you
Most students end up using a mix of federal and private loans to pay for college, as well as scholarships and grants.
Do your best to avoid taking out more loans than you need. While it might feel good to have extra cash on hand today, larger loans can be a serious financial challenge after graduation.
If you’re looking for private student loans, be sure to consider as many lenders as possible. Credible makes this a breeze — you can compare multiple lenders to find the right loan for you, all without affecting your credit score.
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