Types of Student Loans


According to the most recent reports in the US, the total amount of student loan debt is $1.26 trillion, spread out over 44.2 million Americans. Student loans are a part of many people’s lives, and at Climb, we want you to best understand all the options available and what they mean for you. So, we’ve got for you a quick run-down of all the different types of student loans!

There are three broad categories a student loan can fall into, and within those categories are different loans. The first category is federal student loans; for these, the federal government (or, more specifically, the US Department of Education) acts as the lender. The largest program within this is the William D. Ford Federal Direct Loan Program, thankfully often shortened to just Direct Loan Program. Through this program, you could receive five different subtypes of loans:

  • Direct Subsidized Stafford Loans, which are available to undergraduate students who demonstrate a financial need to receive secondary education at a college or trade school. With this loan, the student does not pay interest while in school, during the six month after leaving school, or during deferment.
  • Direct Unsubsidized Stafford Loans, which are available to undergraduate as well as graduate and professional students and do not require demonstrable financial need in order to qualify. With this loan, the student pays interest during all periods.
  • Direct PLUS Loans for grad students, which are available to graduate and professional students to cover educational expenses not covered by other financial aid.
  • Direct PLUS Loans for parents, which are available to parents of undergraduate students to cover educational expenses not covered by other financial aid.
  • Direct Consolidation Loans, which allow students to consolidate all eligible federal student loans into a single loan through one servicer.

The second category of student loans is private student loans. These are alternative sources of funding which are provided by banks or other lending institutions. With these types of loans, terms vary from lender to lender, so you’ll want to make sure you’re doing your research on all options and what their terms will mean for you. Things such as term length, APR and interest rates, and repayment terms all vary between lenders. Additionally, unlike federal student loans, private lenders all have their own unique qualification process. Each institution will have its own application process and requirements for eligibility. Many lenders (including Climb) will allow you to apply with a Co-Borrower—someone who meets the criteria to qualify if the borrower does not and who agrees to take responsibility for the loan if in the future the borrower becomes unable to make payments.

Finally, there are institutional loans. With these types of loans, the school itself acts as the lender. As with private student loans, terms for institutional loans vary between schools, as well as their eligibility criteria. You’ll want to check with your school to see what they offer, if you would qualify, and how their loan compares to others.

When taking out a student loan, it’s in everybody’s interest to ensure all parties are well-informed of their options—including not just loans but also scholarships, grants, and work-study programs—and the impact it will have on them going forward. This was just an overview of broad categories of loans; before making a decision, be sure you’ve done your research. Read FAQs, look at testimonials, and ask any questions of your school and potential lenders to help you make the right choice for you!