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Paying the teacher

• There are several types of student loan available in the United States. Which one you use to pay you or your child’s way through college depends on several factors, from family income and credit score to eligibility for government subsidies.

• Broadly speaking, student loans can be categorized into two types: those offered by federal government agencies and those offered by private sector lenders.

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  Federal student loans are either provided to the student directly or to their parents to pay for their way through college. These loans have low interest rates and do not have to start being repaid until the student completes their tuition and starts making a salary. Interest, however, starts to accrue immediately. In addition to being at a lower rate than private loans, federal student loans can also carry subsidies for eligible families, who might otherwise lack the financial resources to repay the debt.

• Private student loans, like their public sector counterpart, are either provided to students or their parents. In most cases interest rates will be higher, but the amount of money that can be borrowed will also be considerably greater. Like any other unsecured loan, lenders decide whether or not to grant private student loans, at what rate, for what duration and for how much depending on the credit history of the borrower. Those with the best credit history will pay less.