A student loan is a type of monetary assistance, made up of money stipulated to help students in the payment of collegiate and tuition fees over a specific period; and which must be repaid with interest over a span of time (e.g., to be repaid over 30 years).

Before a student applies for a loan, they should ensure to understand who’s offering the loan and what such a loan’s terms and conditions are. Student loans are offered by different sources, such as the federal government, private sources such as a bank/credit union/other financial institutions, or other private organizations. Unlike loans given by banks or other private sources, those offered by the federal government, known as federal student loans, typically have more benefits.

The U.S. DOE (Department of Education) offers four types of direct loans, namely:

·         Direct subsidized loans, which are granted to eligible undergraduate students who display financial need. Such loans help in paying the costs of higher education at a career school or college.

·         Direct unsubsidized loans, which are given to eligible undergraduates, graduates, and professional students, where their financial needs don’t determine their eligibility.

·         Direct PLUS loans, which are offered to professional or graduate students and parents of dependent undergrads to help cover education expenses that aren’t covered by other financial aids. Though eligibility for such loans isn’t dependent on a student’s financial needs, a credit check is necessary. For borrowers with an unfavorable credit history, it’s mandatory to meet certain additional requirements to qualify.

·         Direct consolidation loans, which let students merge all their eligible federal student loans into a solitary loan with a lone loan servicer.

The amount of money a student can get as part of federal student loans depends on whether they are an undergraduate, a graduate, or professional student, or a parent.

The maximum amount an undergraduate student can get annually in direct subsidized and direct unsubsidized loans vary from $5,500 to $12,500, depending on what year they are in school and their dependency status.

Professional or graduate students can borrow up to $20,500 annually in direct unsubsidized loans. They can even use direct PLUS loans for the rest of their college costs, as determined by their school, which other financial aids haven’t covered.

Parents of a dependent undergraduate student can get a Direct PLUS loan for the rest of their child’s college costs, as determined by their school, which hasn’t been covered by other financial aids.