Since banks generally consider loans to students to be very risky, the federal government guarantees student loans. You may borrow from the federal government, from the school you attend, or from a bank.

Interest rates vary by program. For federal loans, qualifying students—based on need—will not have to pay interest while in school. Rates are usually lower than other loans and repayment is usually delayed until you graduate. Loan programs also are available to eligible parents to help with college expenses of their qualifying children.

There are three types of loans:

  • Student loans: Interest begins when you get the money, but you don't have to repay the loan until you graduate.
  • Parent loans: Parent Loan for Undergraduate Students (PLUS) allows your parents to pay for your education. Parents may also want to consider a home equity loan.
  • Alternative loans: If student or parent loans do not cover the complete cost, private lenders may offer loans to cover the rest.

Combinations of these are called consolidation loans. As you near graduation or after graduation, a consolidation loan may lock in at a lower interest rate.

The federal government may subsidize your loan if you demonstrate financial need. This means the government pays part of the interest. You may get the loan from the college or from a bank or other lender.


These loans must be paid back. If you fail to graduate, or do not find a job when you graduate, it may be difficult to pay these loans back. You may be able to reduce the amount you borrow by working while going to school.