Student Loans Pros and Cons

Perkins Loans

Pros

1. Very low interest rates.
2. Does not need a co-signer or credit check.
3. Can improve a credit score.
4. Can be renewed every year until limit is reached.
5. Do not have required payments until after graduation or the cessation of classes.

Cons

1. There is a cap on how much money can be given to an individual overall.
2. There is a cap on how much money can be given annually.
3. Getting this loan can disqualify you from getting other federal aid.
4. It can take a while for the moneys to credit the specified account.
5. They will not cover the entire amount needed for school.  They are only meant to fill in gaps.

Stafford Loans

Pros

1. There is a subsidized variety that offers extremely low interest rates.
2. They are easy to apply for and qualify for.
3. Payments can be deferred in times of financial struggles.
4. Do not require a co-signer or credit check.
5. They are very common and very understood by most office professionals at the college.

Cons

1. Can effect credit score negatively if payments are not made on time.
2. The application can be confusing.
3. They will not cover the entire amount needed for school.  They are only meant to fill in gaps.
4. Many students apply for them which makes them kind of competitive to get.
5. The unsubsidized version of the loan has a higher interest rate.

PLUS Loan

Pros

1. They do not affect your credit score one way or the other.
2. They are easy to qualify for if your parents’ credit is in good standing.
3. There is more flexibility in the pay back options as those are made with your parents and not a bank.
4. Getting this loan will leave you open to apply and qualify for other loans.
5. They can be taken out each year as needed.

Cons

1. Involve your parents in your financial life.
2. Do not have incredibly low interest rates.
3. Only apply to undergraduate students.
4. Will not build up your credit history even if handled responsibly.
5. They add a middle man into an already stressful situation.

FAFSA

Pros

1. It is a FREE application.
2. It is easy to fill out.
3. It offers tax free financial aid options.
4. The application itself does not affect your credit score in any way.
5. There are offers through FAFSA that are not offered in any other place.

Cons

1. It can be hard to qualify for certain grants and loans.
2. It takes a long time to fill out.
3. It requires a lot of personal and important information.
4. The money you get from FAFSA might not come by the time tuition and other costs come due.
5. You are rated by your GPA for some offers, which is bad news for less than stellar students.

Private Student Loan

Pros

1. The contracts usually go through fast.
2. There are a lot of options.
3. You can take out as high of a loan as you will need for all your costs.
4. Responsibly handled, they can reflect well on your credit score.
5. The money is credited to you personally.

Cons

1. The interest rates are usually high.
2. They can be hard to consolidate.
3. The contracts can be hard to understand.
4. They can ruin a credit rating if not paid on time.
5. Many require payments long before graduation.