 TITLE: Which Types of Student Loans Are Best? CONTENT: Federal Student Loans\n---------------------\nYou'll need to submit a Free Application for Federal Student Aid (FAFSA) each year before you can take out federal loans. As long as you meet the basic eligibility criteria, such as being enrolled at least half-time, you may be able to qualify for federal students loans regardless of your income or credit.\nYour school, or prospective school if you aren't enrolled yet, will offer you a financial aid package based on the school's cost of attendance and your financial information from the FAFSA. See \"The 7 Biggest FAFSA Mistakes College Students Make—and How to Avoid Them\" for more information on the FAFSA.\nYour financial aid package could include money for school that you don't need to repay, such as grants or scholarships. Additionally, you might be offered several types of federal and private student loans.\nThere are three types of federal student loans that can help you pay for school:\n*   **Direct subsidized loans** are the best type of federal loan because the government pays the interest that accrues while you're in school, during the six-month grace period after you leave school, and during deferment (periods of loan payment postponement). However, subsidized loans are only available to undergraduate students who have a financial need based on the school's cost of attendance and their expected family contribution.\n*   **Direct unsubsidized loans** are available to undergraduate and graduate or professional students regardless of their financial need. Unlike with subsidized loans, interest accrues during school, grace periods and deferment. You have the option to pay the loan interest during these periods, but if you don't, that accrued interest gets added to your principal balance once you start repaying the loan. That's why if you do take out a direct unsubsidized loan, you should try to pay back any accrued interest before you graduate.\n*   **Direct PLUS loans** are available to graduate or professional students and to parents of undergraduate students. Applicants need to agree to a credit check, which looks for an adverse credit history but doesn't consider credit scores. Applicants with an adverse credit history may need a cosigner before they can take out a PLUS loan. END