Types of Student Loans
Student loans fall under two main categories and an option to refinance:
1. Federal (public) Student Loans
A Federal student loan is direct financial aid given to college-level students by the United States Department of Education. Eligibility for a federal loan is determined based on a student’s financial need. This type of loan is used for undergraduate, graduate, and professional student studies.
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2. Private Student Loans
Private student loans are offered by non-governmental entities such as commercial banks, credit unions, and other financial institutions. Interest on these loans is determined based on an applicant’s credit score and income level. The loan term on private loans is adjustable and may range anywhere from 5-20 years, depending on the service provider.
Private Student Loans are divided into the following categories
- Degree Specific Loans
- Bad Credit Loans
- International Student Loans
- Income Share Agreements
- State Specific Loans
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3. Student Loan Refinance
A student loan refinancing is a type of loan that replaces an existing student loan(s) with a new one. Student loans are often refinanced to take advantage of lower interest rates, better repayment terms and to consolidate several different loans into one.
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How to Choose the Ideal Student Loan
To figure out which type of loan is the best, an applicant needs to make an honest appraisal of several factors, including loan eligibility, loan terms and conditions, APR rate and the repayment plan.