Financial Aid
Education Loan Comparison
What do these types of loans have in common?
You already know that need-based loans like the Perkins and Subsidized Stafford are your best option because the federal government pays the interest until six months after the student is no longer enrolled in school at least half-time. But if you’re not eligible for these loans, or if you need funding beyond what they provide, your next best bet is usually the Unsubsidized Stafford. Except for the interest subsidy, it carries the same repayment flexibility and other benefits as the Subsidized Stafford, but interest does begin accruing on this loan at disbursement. Still, it is not credit-based, so it’s easy to obtain.
Once you’ve maximized your eligibility in these loan programs, your options begin to have a credit component - in other words, either the student or the cosigner (or both) must meet the lender’s credit-worthiness requirements.
Use the links and the chart below to compare these options.
Quick Guide - Which College Loans are Best?
Very simple overview of loan types, listed in order according to best terms;
College Loans: The Basics
How loans work, who provides them, how to borrow only what you need, various loan calculators;
Types of loans - Important loan term definitions, loan descriptions, reasons for taking federal loans first, basic comparison table highlighting differences in borrower and interest rates;
Still not sure which loan is right? Plug your loan amounts into this calculator to compare the Subsidized, Unsubsidized, Parent PLUS and up to two Alternative Loans against one another.
Use the Student Loan Calculator or Parent Debt Calculator to figure out how much your family can really afford to borrow.
Parent PLUS Loan Calculator: What will the Parent PLUS loan look like after four years?
| Federal Direct Parent PLUS Loan | Private Education Loan | Why it’s important | |
|---|---|---|---|
| Who is the borrower? | Student’s natural or adoptive parent, or a step-parent who appears on the FAFSA | Student | Whomever is listed as the borrower is primarily liable for the debt; however, in the case of a cosigned loan the cosigner is equally liable |
| Who is the lender? | US Dept of Education | Multiple lender options available. Search online or view our list. | You will have a long relationship with whatever lender you select. |
| Loan limit per year | Student’s estimated cost of attendance as determined by SU less other financial aid the student is receiving | Student’s estimated cost of attendance as determined by SU less other financial aid the student is receiving | Most families borrow from a combination of loan programs to meet their needs. |
| Cosigner | Parent borrower can add endorser if borrower credit not sufficient | Almost always required for undergrad students; definite benefit to add cosigner - will likely improve interest rate | One decision that must be made is whether the debt should be in the parent’s or student’s name. The PLUS offers parent responsibility for the debt, while the private student loan places the student as primary borrower (although the cosigner is liable also). |
| Can the cosigner ever be “released” from the loan? | No | Varies by lender; if available, student must make a certain number of payments on time and pass a credit check to release the cosigner | Cosigners might feel more agreeable to cosigning if there is an opportunity to be removed from the debt obligation after a certain time period. |
| Interest Rate | Fixed at 7.9% for life of the loan, unless consolidated | Both variable and fixed rate loans available; rates depend upon credit of student borrower and/or cosigner; variable rates generally range from 3.5% to 10%, and fixed rates from 7% to 14%. | While the stable nature of a fixed rate loan has advantages, borrowers and cosigners should carefully consider all options. It is possible that borrowers/ cosigners with good credit may be able to obtain a lower rate on a private loan than is available on the Federal and state fixed rate options. Should the borrower intend to repay the loan in a relatively short amount of time, during which it is less likely a variable interest rate will rise dramatically, selecting a lower rate on a private loan may be the best choice. |
| Interest Capitalization | Interest capitalized (calculated and added to principal) upon entering repayment and again after any period of deferment or forbearance | Varies by lender; most capitalize upon entering repayment and again after any period of forbearance | The more often interest is capitalized, the more expensive the loan. |
| Loan Fee (deducted from disbursements) | 4% for all borrowers | Varies, but most private loans have no upfront fees | State and Federal loans have fees, which are deducted from the loan disbursements, while most private loans do not. |
| Application Process & Timeline | Parent can apply online at www.studentloans.gov; process can take as little as 5 business days | Apply on line with the; loan process takes approximately 3-4 weeks | Almost all education loan processes are now done online. It is critical that you keep track of when additional steps must be completed - watch your email! |
| Credit Requirements | No debt to income ratio or credit score is used; see our PLUS Loan page for more info | Varies based on lender, but most require a minimum of 3 years of positive credit history and at least 3 open credit accounts | With private loans, a borrower (or cosigner’s) credit history helps to determine the interest rate. |
| Consolidation | Federal Direct Consolidation Loan through US Department of Education - www.loanconsolidation.ed.gov (a parent’s loans cannot be consolidated with his/ her child’s student loans) | A few lenders offer private consolidation loans to assist borrowers with multiple private loans; these loans cannot be consolidated with Federal loans | Consolidation is primarily a helpful tool for students with multiple loans of the same type held by different lenders or servicers. |
| Loan Repayment Plans | Multiple repayment plans, including some based on income, are available. More information online. | Traditionally, private loans have repayment periods of 10-25 years, typically spread out in equal monthly payments | Private loans tend to have fewer repayment choices than Federal and state loans. |
| Postponement of Payments | Several deferments for school enrollment, unemployment, military service and economic hardship. More information online. | Most private loans have minimal periods of postponement available for economic hardship; see prom note for details | No one expects to be unemployed or need to postpone payments, but these options can be crucial if you need them. |
| Loan Forgiveness/ Cancellation Availability | Loan is cancelled upon death or total and permanent disability of either student or parent borrower; some forgiveness options available for certain public interest careers | Some lenders do forgive loans in the event of borrower’s death or total and permanent disability; see prom note for details | If the unexpected occurs, it’s very helpful for remaining loan balances to be forgiven. |
| Federal Direct Parent PLUS Loan | Private Education Loan | Why it’s important |
