In most cases student loans have much lower interest rates than other types of loans and are usually financed through the federal government as opposed to private industry, although in some cases they are done through banks or other financial institutions.

There are two kinds of student loans offered in the United States. These include federal student loans whereby the money is given to the student and federal student loans in which the money is loaned to the parents of the student for the purpose of the student’s education.

Federal student loans given to students come in the form of subsidized or unsubsidized loans. Practically any student seeking a loan to attend an institute of higher learning is eligible for one. Both subsidized and unsubsidized loans come with a grace period of six months no interest after graduating and/or a three-month grace period if the student were to switch to part time studies or not graduate at all.

Federal student loans that are subsidized are geared for those who have the greatest financial need and for those whose family have a low yearly income. In this instance, the government pays the interest charges on the loan while the student is still attending school. In other words, whatever the student borrows is what the student needs to pay back with no additional interest charges.

Unsubsidized federal student loans means that the government does not pay any interest on the loan while the student attends school and therefore after graduation the student is required to pay the amount he or she borrowed with interest. The interest is calculated into the total and that is what the student must pay back. Those with higher family incomes are more likely to be approved for this kind of student loan than a subsidized one.

Federal student loans that go to parents for their student’s education are known as PLUS loans (“Parent Loans for Ungraduate Students”). In this case a parent can borrow a great deal more money than a student could on his or her own but there is no grace period whatsoever. Once the student no longer attends a financial institution the repayment begins and the parent is responsible to make the payments, not the student. As of July 2006 interest rates on these types of loans are expected to rise to around 8.5%.

Before deciding on which loan is best for you, it is important to give careful consideration to both and to do your research so you can make an informed decision.