Student Loan Options for College Students

Student loans can help cover to the cost of your education when your aid package falls short. Some of the most popular student loans include federal loans, private loans, peer-to-peer loans and social networking loans.

Federal loans are the most common education loans. They're available from federal loan programs and frequently offer more favorable terms than private loans or peer-to-peer loans. The Stafford loan is the most common federal loan. It's available to students who demonstrate financial need. Other popular federal loans include the Perkins loan, offered to students with exceptional financial need, and the PLUS loan, available to graduate students and to parents of dependent students. Students who cannot demonstrate financial need can also apply for unsubsidized loans through the federal government's Direct Loan Program.

Private student loans are similar to federal loans, but tend to have less favorable terms. For example, interest rates are often higher and grace periods (periods when no payments are due) are usually non-existent. Getting a private student loan can also be more difficult because the loans are given out by banks rather than the government. Banks will check your credit score and may not approve your loan application if you are having financial difficulties. Despite the drawbacks, private student loans can be a good way to fund your education. The key is to compare lenders and find the loan with the most favorable terms.

Peer-to-peer loans are becoming increasingly popular. These loans, which are available through sites like Prosper and Lending Club, are personal loans from unnamed investors. You receive the money you need and investors earn returns on their money through the interest you pay.

Social networking loans are similar to peer-to-peer loans but rely on a social networking platform. You begin by asking your friends, family and other members of your social network for small loans for college. Then, you sign up for a service like Green Note which will create formal, legally-binding loan agreements. You receive the money you need and your social network makes money on its investment through the interest you pay on the loan.

A final loan option for students involves borrowing from family. Naturally, there are many different pros and cons associated with this option. If you do borrow from a family member, you should consider drawing up an official contract. This will eliminate confusion about the loan terms for both of you.