Private student loan? Or Federal student loan?
The choice is yours, but here are some details and/or options to help you along in the decision making process.
Whether you are in the United States or Canada, you fill info relevant to your own specific situation.
U.S. Federal Student Loan.
As mentioned on our main page, within this category, you have a few options, depending on your situation. They are:
The Stafford Loan: Since there are no restrictions as to who can apply, this is the most popular federal student loan. You will not need to demonstrate a financial need. The Stafford Loan is available either subsidized or unsubsidized, with a fixed interest rate. If you have the subsidized option, the government pays the interest while you are in school. If you have the unsubsidized loan, the student pays the interest, but does have the option of deferring payment until after graduation. Regardless, this loan requires a student to be enrolled at least half-time.
The Perkins Loan: This loan comes with a restriction. A student must be able to prove financial need to take advantage of its very low fixed rate. Undergraduates are able to borrow up to a maximum or $4,000 and graduate students to a maximum of $6,000. Unlike the Stafford Loan, the student does not have to be enrolled at least half-time.
The Parent Loan for Undergraduate Students. (The PLUS Loan): As the name implies, this loan is taken out by the parent/s. Credit checks are done, so be aware that negative findings on your credit report could be detrimental. This loan is for parents of undergraduate students enrolled at least half-time. Parents are allowed a borrowing limit of the student’s cost of attendance less other student aid they may have received. This loan comes with a higher fixed interest rate. Repayments are due to start while the student is still in school.
The Canada Student Loan Program (Federal Student Loan).
Only available to those wanting to attend a post-secondary institution, who can demonstrate a financial need.
Prefer to study abroad? Learn more about the Government of Canada’s International Academic Mobility Initiative (IAM)
In Canada, both the Federal and Provincial governments ante up some of the loan. Generally a 60/40 split. The amount a student can receive, as well as the interest rate charged, varies by province.
Since all applications for a Canadian student loan are handled at the provincial level, the process varies by province. Your best bet it to start here.
Private Student Loans in the United States.
A credit check will be done, and the need of a co-signer is likely. You must be working towards an undergraduate or graduate degree and enrolled at least half-time at a 4 or 5 year university or college that is approved by the U.S. Department of Education.
The interest rate is set by the lender and will vary based upon your credit history. The better your credit score, the lower the rate.
Variable rates are based on the prime rate and will change if the prime rate changes.
You may only borrow up to cost of attendance—amount will be certified by you school of choice— less any other financial aid received.
If a student is enrolled more than half-time you don’t need to make payments and you have six months after leaving school before payments begin. Repayment term is 15 years, but is negotiable under some circumstances.
Private Student Loans in Canada.
This student loan generally comes in the form of a line of credit, often with a co-signer. Just as with any line of credit, the amount the bank will give will vary by individual. The student only pays interest on the amount of the line they actually use, and interest only payments start while the student is in school. Again, interest rates are tied to the prime rate.
The line of credit is closed upon graduation. The student has a grace period of one year before interest and principle repayment begins. If the student leaves school before graduation, they must begin repaying in six months.
So, private student loan or federal? You decide.