Federal vs. Private

Federal loans, offered through the U.S. government, have fixed interest rates but generally limit the amount that can be borrowed. Private loans, available through banks and other lending institutions, offer more flexibility but usually come with higher costs.

Federal Loans

Federal loans can be initiated and paid back by either the student or parents. Student loans include subsidized or unsubsidized Stafford loans, Perkins loans, and Graduate PLUS Loans, each with unique characteristics. Parents who meet specific criteria can apply for Parent PLUS loans.

Private Loans

With the student as the borrower, a parent is frequently asked to co-sign. Based more on credit scores, these usually have more flexible terms and greater limits, but also carry higher interest rates.

Repayment

Options offered for loan repayment vary among federal loan types and private loans, with deferments and loan consolidation available under certain circumstances. Remember that an option creating a longer re-payment period adds to the ultimate cost of the loan.

Cautions

The commitment to a student loan should be thought through very carefully. Penalties for defaulting on loan repayment can be steep with long-lasting effects.

Source:

Ultimate Money Skills.com: Student Loans