What Are Guaranteed Student Loans

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What are Stafford, Perkins, and PLUS loans? What's a subsidized or unsubsidized loan? These things can be pretty confusing, but one of the most confusing things to understand are guaranteed student loans. What are these loans, anyway, and how can you benefit from them?

A guaranteed loan is basically one in which the lender knows it will get paid back. If, for instance, you were to as your friend Jerry to lend your friend Bob $200, Bob might be reluctant to do that. What if Jerry didn't pay back the money? If you have a good reputation, though, you could guarantee the loan. Tell Bob that if Jerry defaults on the loan - or doesn't pay it back in time - that you'll pick up his slack.

This is basically what the federal government does for a guaranteed loan. They don't offer the loan from their own funds. Instead, the loans are offered through regular lending institutions. These institutions, though, can be more comfortable loaning money to students and parents of college students because the federal government is guaranteeing the loans.

The government is basically ...
... saying to these banks that it will pay back your loans if you default. This makes you a much lower risk to lend money to. Lower risk means that you can get a loan in the first place and that you can get a decent interest rate and good repayment terms, as well.

Guaranteed student loans are those like the Stafford loan, which often comes from a lending institution other than the Federal government. Some loans, though, like the Perkins or PLUS loans come straight through the government.

Knowing which type of loan you have can help you keep the paperwork straight. For a guaranteed loan, you'll get paperwork from the bank that is lending you the money. For a government loan, you'll get paperwork from the federal government's direct student aid program. Chances are likely that during your college career you'll end up getting both types of loans at one point or another. It's important to keep your paperwork straight so that you know where to go when you need more information about your student loans from your lender.

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http://tuitionchart.com/.