Types of Student Loans (2024)

FAQs

What are the four types of student loans? ›

Federal Loans

There are four types of Direct Loans: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans. Direct Subsidized Loans are made to eligible undergraduate students based on financial need. Your school determines the amount you can borrow.

Plan 2 refers to a student loan taken out from September 2012 onwards, in England or Wales. Older loans (from England or Wales) and loans taken out in Northern Ireland, are called plan 1 loans.

The most common federal student loans are Direct Subsidized Loans and Direct Unsubsidized Loans.

A subsidized loan is your best option. With these loans, the federal government pays the interest charges for you while you're in college.

Direct Subsidized Loans: You won't be charged interest while you're enrolled in school or during your six-month grace period. Direct Unsubsidized Loans: Interest starts accumulating from the date of your first loan disbursem*nt (when you receive the funds from your school).

Types of federal student loans

Direct Subsidized Loans. Direct Unsubsidized Loans. Direct PLUS Loans, of which there are two types: Grad PLUS Loans for graduate and professional students, as well as loans that can be issued to a student's parents, also known as Parent PLUS Loans.

Repayment plan 5 is a new repayment plan, being introduced for students starting undergraduate and Advanced Learner Loan courses on or after 1 August 2023. You won't be expected to make repayments to your plan 5 student loan until April 2026 at the earliest, even if you leave your course early.

If you're a Scottish student who started an undergraduate or postgraduate course anywhere in the UK on or after 1 September 1998, you'll be on repayment Plan 4. This means you'll pay 9% of the income you earn over the threshold to the Student Loan Company (SLC). This percentage stays the same if your salary rises.

If you have a loan with a variable payment, it may make more sense to start with that debt before rates begin increasing. Alternatively, it might be better to refinance to a loan with a fixed rate if possible. Another option is to start with the loan that has the highest interest rate.

If you racked up $30,000 in student loan debt, you're right in line with typical numbers: the average student loan balance per borrower is $33,654. Compared to others who have six-figures worth of debt, that loan balance isn't too bad. However, your student loans can still be a significant burden.

Is $200 000 in student loans a lot? ›

This can leave borrowers with six-figure education debt worried that typical student loan advice may not apply to their situation. And the number of borrowers with high education debt is growing. As of 2023, there are one million federal student loan borrowers who owe $200,000 or more, according to StudentAid.gov.

Report Highlights. The average monthly student loan payment is an estimated $500 based on previously recorded average payments and median average salaries among college graduates. The average borrower takes 20 years to repay their student loan debt.

Student loans don't go away after seven years. There is no program for loan forgiveness or cancellation after seven years. But if you recently checked your credit report and wondered, “why did my student loans disappear?” The answer is that you have defaulted student loans.

For this reason, lenders often require a minimum credit score between 650 and 700 for a private student loan. If you don't have a credit score of at least 650, you'll likely need to add a creditworthy cosigner to your loan.

The best alternatives to student loans are ones you don't have to pay back, but it's worth considering other options—such as employer education benefits, working while in school, or payment plans—if you don't qualify for scholarships and grants that cover all your education costs.

If you're a Scottish student who started an undergraduate or postgraduate course anywhere in the UK on or after 1 September 1998, you'll be on repayment Plan 4. This means you'll pay 9% of the income you earn over the threshold to the Student Loan Company (SLC). This percentage stays the same if your salary rises.

Funds for Direct Loans come from the federal government; loans made through the FFEL program are provided by private lenders and are insured by guaranty agencies and reinsured by the federal government.

You can identify your loan types by logging on to StudentAid.gov and selecting “My Aid” in the dropdown menu under your name. In the “Loan Breakdown” section, you'll see a list of each loan you received. You'll also see loans you paid off or consolidated into a new loan.

No new loans have been made under the FFEL Program since July 1, 2010. However, many people and schools also informally use the term “Stafford Loans” or “Direct Stafford Loans” to refer to Direct Subsidized Loans and Direct Unsubsidized Loans made under the William D. Ford Federal Direct Loan (Direct Loan) Program.