While included in the term "financial aid", higher education loans differ from scholarships and grants in that they must be paid back. They come in several varieties in the United States.

Government Loans

Student vs. Parent

Federal Student Loans can be made to the student or to the parent. Another type of loan, the alternative student loan can be made to either students or parents. Here’s a rundown of how they stack up:

• Federal Student Loans made to students directly: low interest rates and no payments until after graduation ("grace period"), but amounts are quite limited.
• Federal Student Loans made to parents: much higher limit, but payments start immediately, loan is in the parent’s name, and interest rates are higher than federal student loans made to students directly.
• Private Student Loans made to students or parents: much higher loan limits, modest interest rates, and no payments until after graduation.

Federal Student Loans To Students

Some federal loans are made directly to the student. These loans are available to college and university students and are used to supplement personal and family resources, scholarships, grants and work-study. A key consideration in federal student loans is whether they are subsidized or unsubsidized.

Federal Student Loans To Parents

Usually these are described as PLUS loans (Parent Loans for Undergraduate Students). Unlike loans made to students, parents are able to borrow much more - usually enough to cover any gap in the Cost of Education. However, there is no grace period whatsoever. Payments start immediately.

Parents should be aware that THEY are responsible for repayment on these loans, not the student. This is not a "cosigner" loan with the student having equal accountability. The parents are on the hook to pay and if they do not do so, it is their credit that will suffer. Also, parents are advised to consider "year 4" payments, rather than "year 1" payments. What sounds like a "manageable" debt load of $200 a month in freshman year can mushroom to a much more daunting $800 a month by the time 4 years have been paid for through borrowing. The combination of immediate repayment and the ability to borrow substantial sums can be dangerous.