Most people are familiar with student loans that require a parent or guardian as a co-signee, but these are not the only types of student loans available. In fact, student loans are only on parents up until the student reaches the age of 24; after that time the student no longer has to rely on the income of his or her parents nor is it necessary for a parent to co-sign on a student loan. In order to more clearly identify the difference in the two types of loans, the following explanation should help potential students determine into which category they are more likely to fall:
According to Federal Guidelines a student is considered dependent up to the age of 24 except under certain circumstances. For the purpose of a student loan that means the parents are responsible for the loan even if the student does not live at home and does not have an ongoing relationship with his or her parents. It also means the income of the parents determines the student's loan eligibility.
Independent student loans are geared toward those students who meet the following criteria:
While there are several other factors that determine independent status, these are the most common ones. Unlike the dependent student loan, the independent student loan is the sole responsibility of the student and is based on the student's eligibility rather than that of the parents.
The most popular government-insured student loan is the Stafford Loan that also has the lowest interest rate. These loans are fixed-rate loans for graduate and undergraduate students who are attending a college or university at least half time. Students can borrow up to $20,500 annually to cover tuition and other college expenses. In addition there is a Stafford Plus Student Loan available for those dependent students whose parents are able to pass a credit check. This may allow them to borrow enough funds to finance the entire cost of their tuition.
Private student loans offer another alternative for those students who need funds beyond what they are able to obtain in financial aid. Private student loans are credit-based funding available through a number of sources including Sallie Mae and many different financial institutions. Since these private loans are not restricted to those students with financial needs, they can open the doors for many more students who need help paying for their college educations.