Student loans work like any other loan – you borrow a certain amount of money from private graduate student loan lenders or the government and then have to pay that money back over time, with interest.
You can usually choose how long you have to repay your student loans, although most private lenders require a. minimum repayment period of 10 years.
The interest rate on your loan will depend on the type of loan you have and when you took it out – federal student loan interest rates are set by the government, while private student loan rates are determined by each lender.
Different types of student loans.
1. Federal student loans
Federal student loans are loans that are provided by the government. These loans usually have lower interest rates and more flexible repayment terms than private student loans.
There are four main types of federal loans
1. Direct Subsidized Loans: These loans are available to students with financial needs. The government pays the interest on these loans while the student is enrolled in school at least half-time.
2. Federal Direct Unsubsidized Loans: These loans are available to all students, regardless of financial need. Unlike the Direct Subsidized Loans, the student is responsible for paying the interest on these loans
3. Direct PLUS Loans: These loans are available to graduate or professional students as well as parents of dependent undergraduate students. The interest rate on these loans is higher than the other types of federal student loans.
4. Direct Consolidation Loans: These loans allow you to combine all your federal student loans into one loan with one monthly payment. This can be helpful if you have multiple loans with different interest rates or terms.