Types of Student Loans
Students and families are often confused with the variety of options available when it comes to financing a college education. There are a myriad of options, from college scholarships and grants to federal and private student loans.
As part of the Higher Education Act of 1965, President Lyndon Johnson created a law which was intended “to strengthen the education resources of our college and universities and to provide financial assistance for students in postsecondary and higher education.” This increased all sources of federal funding provided to universities and added in grants and other forms of financial aid, including new student loan programs.
The first federal loan, federal Stafford Loan, is available to both undergraduate and graduate students enrolled at least half-time at a college or university accepting federal aid. This is a need-based program in which undergraduates may borrow up to $5,500 per year in subsidized funds based on academic level and graduate level students may borrow up to $18,500 per year (up to $8,500 in subsidized funds and the remainder in unsubsidized funds). The funds are sent directly to the school and are applied to the student’s account. To ease the financial burden, payments are not required until six months after the student graduates.