Types Of Student Loans

The Federal Direct Loans program otherwise known as direct student loans is available as consolidated and non-consolidated loans.  

Non-consolidated loans are one of the very basic loans which is used by students or their parents in a way to help with the post secondary education.

Most of the target for FDLP loans is for college education.  There are 3 types of non-consolidated loans:-

• Subsidized loans.

• Unsubsidized Stafford loans

• Parent loans for Undergraduate Students (Plus loans)

The subsidized loans are made available to only the students that have proved a financial need to fund for their education.  In subsidized loans, the students are not charged the interest as long as they are in their school during their period of education because chances are less for the student to be able to work while they study at this period to repay a huge sum back.  After the student graduates, if they are not able to find employment full-time in a way to earn an income enough to repay the money they are given a grace period of 6 months during which they are relaxed from making any interest payment.

The unsubsidized loans are made available to students whether they prove a financial need or not.  However, unsubsidized loans does not include interest subsidy.  In cases where the borrower chooses to not make the interest payment while they are at school, the amount due in interest is added to the principal balance.  The principal balance should be repaid as a part of the overall principal loan amount in outstanding.

The PLUS loans are given to the parents of dependent students.  The parents apply for the PLUS loans to fund for the educational needs of their children. These loans are unsubsidized loans and the interest has to be repaid while the student is still in school and the parents must repay the interest charges applicable.

Apart from non-consolidated there are also consolidated student loans.  While the students are continuing their education, they are likely to get loans from more than one Federal Program to meet with their educational expenses.  In such cases the students can combine all their loans together and consolidate it to make one single repayment every month.

Borrowers of students loans con consolidate their loan at any time regardless of the interest rate on their loans being subsidized or non-subsidized. However, all of the consolidated loans should be repaid under the income contingent repayment plan.