Students have to manage their finances well while in school and knowledge of student loans is important if not critical to survival. In a study conducted by the government, more and more students are availing loans and over 70 5 have credit cards with balance carried over from month to month.

There are three types of student loans. Perkins, Stafford and PLUS. Perkins and Stafford loans are taken directly by students themselves.  A  Subsidized loan means the government picks up the interest on the loan till you start paying back the loan, which is often six months after leaving school.

Often a subsidized loan by itself is not sufficient to sustain full student tuition. In that case an unsubsidized Stafford loan is the next option. Here, the interest on the loan starts accruing from the day loan is granted. The only caveat is that the interest and pament is deferred and has to be paid after schooling. The essential difference between a subsidized and unsubsidized loan is the form of interest payment. In the former case you save on interest till actual repayment of loan is due after schooling. The interest tab is picked up by the federal government or the school itself. It is for this reason that a subsidized loan is need based. In latter case, the borrower has to bear the interest burden right from day one, though payment is deferred just as in the case of subsidized loan.

A PLUS loan is on the other hand taken by the parents of students. Though one may prefer   parents to pick up the tab while in school, it should remain as the last option. Unless, of course, the parents are rich enough to take the financial burden. If that were the case, one need not juggle between so many options.  In a PLUS loan, parents have to start repayment of the loan right from the day the loan is sanctioned. The interest payment also needs to begin forthwith. The interest till end of school which would have been paid by the Federal government would now be paid by the parents.

Therefore, in order of priority, students should avail of the subsidized Perkins and Stafford loan, to the extent possible. The balance expenses should be met through unsubsidized Stafford loan.