College Loans

Once after getting admission in a college if you feel that the finance is going overboard. Then, you decided to apply for financial aid. You may then be offered a loan as part of the college's financial aid offer. A loan is money you borrow that must be paid back with interest.

Updated by Akshay Nair P R on 22nd June 2018

College Loans

These are the loans designed to help college going students to pay for their education, book, supplies and living expenses.

It is different from other loans as it is provided at very less interest.

Once you have decided that you will take a loan to pay your college expenses, make sure that you understand the details of your loan, who is giving the loan and the terms and conditions of your loan.

These college loans can come from both Federal Government as well as from private sources such as banks and financial institutions. 

Types of Loans

One of the most common terms that we come across when we hear about loans is 

  • Need-based loans: Given to students who need financial support for this, they need to provide a financial report of the families annual earning

  • No need-based loans: Given to students who want to take a loan even though they can pay the college fee without that

Need-based loans

Non-need-based loans

Federal Perkins Loan

Federal Direct PLUS Loans

Federal Direct Subsidized Loans

Federal Direct Unsubsidized Loans  

  • Federal Perkins Loan: This loan is awarded by the college to the students with the highest need

  • Federal Direct Subsidized Loans: This loan is also provided according to need. In this loan, you don't have to pay interest while you are in college, as the government will pay on behalf of the student.

  • Federal Direct PLUS Loans: This loan allows a parent to borrow the total cost of the college

  • Federal Direct Unsubsidized Loans: This loan charges you interest but allow you to add the interest fees to the amount you borrow until graduation. But, it would be better if you pay for it simultaneously

After this need and non-need loans, then come the other two types of loans.

  • State Loans: In addition to the grants and merits the state offers student loans also.

    The terms and conditions are almost similar to that of the Federal States.

    These type of loans have more interest rates in comparison to the Federal government.

    As state government does not have as deep pockets as that of the Federal government.

    Example: Arizona Higher Education Loan Authority, The Florida Department of Education Office of Student Financial Assistance (OSFA), Oklahoma College Assistance Program (OCAP).

  • Private Loans: In general, they are not need-based and are also non-subsidized, it requires a good credit score and a cosigner.

    The interest rate may vary according to various financial institutions and banks. 

The table below contains the breakdown of the whole type of loans with their current interest rates



If need a loan and you are planning to take one I would suggest you go for need-based loans. Later you can try for any Federal loan, as that is much better in all aspects compared to private and state loans. Overall these loans are playing an important part by providing help to those students who otherwise would not have been able to afford higher education.


  1) What loans are available for college students?

Broadly there are two major types of student loans, Federal and Private loans. In this, the Federal loan dominates the whole loan system. Federal loans are also of two types Stafford Loans and Perkins Loans. 

  2) What are the three main types of Federal Loans?

The three main type of Federal Loans are:-

  3) Can anyone apply for a student loans?

Almost all students can apply for a student loan, but the student with genuine financial need can borrow with the best terms. One factor that would play an important factor in your loan scenario is your dependency status. So, before applying for a loan you should figure out whether you would be considered as an independent student or one who is dependent on their parents.

  4) What is the difference between loans and grant?

The main difference between both of them is that in loans we are required to repay the money we borrowed with some interest, and also it is need-based. In case of grants, it can be considered as a gift given based on merit which is not required to be paid back.

  5) How long do I have to pay off a student loan?

First, you should know that the type of loan you borrowed would decide on your monthly payment amount and also typically the year it would take to pay it off. If you want shorter repayment time then the monthly payment would be huge and if you would consider longer time duration for repayment then the monthly payment would be reduced.