QandAs: Loans

What is a Student Loan?

Answer:
There are two types of student loans: federal

and private. Federal student loans, known as Stafford loans, are regulated and guaranteed by the government. The funds may come directly from the government or banks that participate in the Stafford loan program. You are not required to make payments until you graduate or withdraw from school.

Some Stafford loans are subsidized, meaning interest does not accrue while you are in school. Whether you qualify for a subsidized loan is based solely on your financial need.

Private student loans are made by commercial lenders and are subject to credit approval. The terms of private loans vary by lender, but you can generally borrow more and have greater control over how the funds are spent. Private loans are designed for students whose financial needs are not fully met by the Stafford program.