Posted by Maneesh Sethi :: September 28, 2007 @ 9:42 am

Colleges will often offer student loans as part of their financial aid packages, coming in two varieties---subsidized and unsubsidized. These two types of loans differ substantially, because subsidized loans are much more beneficial to you.

If you take a subsidized loan, the government will pay the interest on the loan while you are in school. You don't have to start repaying the loan until after you finish school, but once you finish school the interest begins to accrue.

In an unsubsidized loan, interest begins to accrue immediately. You do not have to start repaying the loan principal until after you graduate, but you are responsible for making payments on the interest while you are in school.

The government puts caps on the interest rates for Stafford and Perkins loans. The cap, as of July 2006, is 6.8%. This means that each year, the interest you have to pay compounds by less than 7%.

The Department of Education site Student Aid on the Web is a portal with information about all federal student aid programs. FinAid is another site with helpful information.

Investigate these programs carefully to understand your options. Then, if your student aid package does not cover all of your educational expenses, consider taking out a P2P loan on Lending Club.