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Parent PLUS loans and Private Student Loans are two great ways to help handle college payments. Both are great tools to use but which is right for you?
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An unsubsidized loan means interest begins accumulating while you are attending. You aren't required to make payments until after your time in school. This loan can add thousands to the principle that you will have to repay.
These loans still accumulate interest while you are attending school, however the federal government pays those interest payments while you attend school so when you graduate you only have the original principle you took out. That paid interest is free money to you, and means you will owe less when you do begin the repayment plan.
This loan type is completely funded through the federal government. As of July 1st Unsubsidized Federal Direct Loans have a fixed 4.29% interest rate and a 10 year repayment plan. Subsidized Federal Direct Loans as of July 1st are also a fixed 4.29% interest rate, but interest and payment is deferred until after graduation
This is another type of federally funded loan. These loans are considered the 'best deal' for those who qualify. They are subsidized, can award a maximum of $5,500 each year, have a fixed 5% interest rate, and have a 9-month grace period.
Parents can take these loans out on behalf of their student regardless of family need. They are another federally funded loan and are intended for spending outside of college expenses. They have a fixed 7.9% interest rate. Repayment begins 60 days after the money is disbursed, but in certain situations can be deferred up to 6 months after graduation.
These are the only loans, of the ones listed here, not sponsored through the federal government. These loans are privately funded through any number of financial institutions such as banks, credit unions, and money lenders. These interest rates tend to be higher than the government sponsored programs and are dependent on you and your parent's credit scores and on the institution you are borrowing from. These loans have shorter repayment plans and little to no grace period.
Use the following chart to help you gauge how much is a good amount of loan debt to carry.