Types of Student Loans

With effect from 2010, there are two types of federal college student loans and a plethora of private college student loans to choose from. The exact type of student loans for which you might want to apply for will mainly be determined by whether you are classified as a dependent or independent student – and there are certain characteristic points that separate the one from the other.

The Difference of Dependent and Independent Students

For a private student loan your dependency status is less relevant than it is for a federal college student loan. So the main question is what is meant by the classifications of dependent and independent student for federal student loans? If you are going to college or university straight from High School - chances are you’ll be classed as a dependent student for the purposes of college student loans assessment. The reason for this is that you will be able to live in a family home provided by someone else (most likely your parents), at least during vacations from your studies if not during the study periods as well. Also, to this end you’re deemed to have ‘responsible’ adults who can/will take charge of your welfare as/if the need arises – meaning, they pay for everything you need. An independent student is typically one to whom any of the following conditions can be applied; you’re in your mid-twenties, you’re married and are no longer dependent on your parents, you are studying for a higher degree or a better qualification level or that you are currently in the armed services or hold veteran status. Under other certain circumstances it is also possible for you to be judged as an independent student, however, the above is the basic outline for defining when an independent federal college student loan might be considered to be awarded.

The Difference of Federal and Private Student Loans

Under the federal college student loan, either as a dependent or independent student, you now have to apply for a federal Direct Deal Loan. Depending on this scheme the vast majority of dependent college student loans go to students on undergraduate course. The amount you can lend in this federal scheme increases each year from $5500 in the first year to $7500 in the third. Independent students can receive up to $9500 rising up to $12500 in the third year (mostly because these students already have a family they need to provide for). However, if you are studying for a higher degree, automatically classed as independent study, you can borrow up to $20,500 a year. The parents of a dependent student, should they wish to, also have the possibility to apply for a federal parental support student loan to help with your college expenses, a Direct Plus Loan, but this is subject to a maximum determined by other federal financial aid you’re already receiving and is typically less than $2000 a year. So, with a federal college student grant you could have as little as $5500 a year to pay all your fees and living expenses! Conversely private college student loans can be arranged so as not to limit you in both your choices of where and what you study; as well as being able to adequately fund your accommodation and living expenses - as there is technically no cap on the amount that you can borrow. But, any you should never forget about that, it is your responsibility to make sure that the amount you borrow is within your means to repay on graduating.

Private College Student Loans

A simple research on the internet will return numerous college student loan providers, all willing to offer undergraduate, graduate and continuing education college student loans. With the federal student loans being relatively low, many students also take out private student loans to boost their funds and financial strength. This money is not necessarily to enable them to live a lavish lifestyle whilst a student and, indeed, a responsible bank or finance company offering college student loans will counsel applicants against such a request. However, the fact is that some universities charge more than others for their tuition and accommodation fees, meaning that the federal loans simply don’t stretch as far as you need them to and are able to pay off everything you need (don’t forget, you do not just need a place to sleep, you also need books, a computer and writing material too!). Also, do make sure you’ve already secured the maximum available to you in federal student loans before applying for a private one - again a reputable college student loans company will advise you to do this anyway. And finally, when applying for your private college student loan - you should also enquire what special deals the bank can offer you on your general student banking and credit card options