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The Skinny on Student Loans

An education loan is a form of financial aid that must be repaid, with interest. Federal law sets the maximum interest rates and fees lenders may charge for federally guaranteed loans, and nothing prevents a lender from charging lower fees.

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Here are three types of education loans:

Federal Student Loans

Many students rely on federal government loans to finance their educations. These loans have low interest rates and do not require credit checks or collateral. Student loans also provide a variety of deferment options and extended repayment terms. Student loans include the Federal Stafford and Federal Perkins Loans. For more information:

- Free application for federal student aid

Private Loans

Private Education Loans, also known as Alternative Education Loans, help bridge the gap between the actual cost of your education and the limited amount the government allows you to borrow in its programs. Private loans are offered by private lenders, and there are no federal forms to complete. Eligibility for private student loans often depends on your credit score.

Loan Consolidation

Consolidation loans combine several education loans into one bigger loan from a single lender, which is then used to pay off the balances on the other loans. It is very similar to refinancing a mortgage. Consolidation loans are available for most federal loans, including FFELP (Stafford, PLUS and SLS), FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Guaranteed Student Loans and Direct loans. Some lenders offer private consolidation loans for private education loans as well. For more information:

- FinAid’s page of common questions about consolidation

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