Key points There are two main types of student loans: federal and private. Annually, about 40% of adults who attended college used student loans to pay for a portion of their expenses. To get federal loans, you’ll need to complete the FAFSA every year. Private student loans require a solid credit score and history for eligibility. Most private student loans require a creditworthy cosigner. Are you sitting down? A single year of tuition and fees at a four-year college costs $10,740 to $38,070, depending on the type of school you choose. Gulp. If you need to borrow student loans to pay for college, there are a few different types to choose from. The ones you pick matter — your interest rate, repayment terms and perks all depend on the type of student loans you take out. Before you borrow, make sure you’ve exhausted all your free money options first. Scholarships and grants are types of student aid that don’t need to be repaid. The more free money you get to cover your education costs, the less you’ll need to borrow in student loans. After you’ve used up all the free money you can find, it’s time to apply for student loans. Each year, about 40% of adults who went to college use student loans to cover some of their costs. Here’s the breakdown of the different types of student loans you can borrow to pay for school. Federal student loans Federal student loans are loans you take out with the U.S. Department of Education. While you borrow money from the federal government, the Department of Education has contracts with private lenders to service the loans. “Students should always exhaust their federal student loan eligibility before turning to private loans,” says Michele Streeter, associate director of policy and advocacy with The Institute for College Access & Success (TICAS). “​​Federal student loans offer lower interest rates and much more favorable terms than private loans.” To get any federal student loan, you’ll need to complete a Free Application for Federal Student Aid, or FAFSA. This is your ticket to all federal aid, including federal student loans. To complete the FAFSA, you’ll need tax returns (for students and parents or just for students, if they are independent), bank and brokerage account statements, and other financial information. These determine the Expected Family Contribution (EFC), or how much your family is on the hook for when it comes to paying for school. Types of federal student loans There are a few different student loans you might be eligible for. The types of federal student loans are: Direct subsidized loans. These loans are given to undergraduate students based on financial need. The government covers the interest payments (or subsidizes) for the entire time you’re in school at least half-time. You’re responsible for interest that gets charged to your loans once you graduate. The amount you can borrow is capped based on your year in school. For instance, first-year students can’t get more than $3,500 in subsidized loans. Direct unsubsidized loans. Anyone can borrow unsubsidized loans and they aren’t based on financial need. You’re on the hook for interest charges while you’re in school, although you can defer payments until after you graduate or drop below half-time enrollment. You’re still limited to how much you can borrow, but it’s not as low as subsidized loans. First-year dependent students can borrow as much as $5,500 (with $3,500 of that $5,500 as the max allowed in subsidized loans). Direct PLUS loans. These loans are available to graduate or professional students or parents of undergraduate dependent students. Eligibility isn’t based on need but there is a credit check required. This is the only federal loan that requires a credit check, so having an adverse credit history could hurt your chances of qualifying. Eligibility does not, however, depend on credit scores. This loan covers the cost of education after all other aid has been applied. Direct consolidation loans. You can take out this consolidation loan to combine all your eligible federal student loans into one. Your interest rate is the weighted average of your federal loans rounded up to the nearest one-eighth percent. Due to limits on how much you can borrow per year, you’re essentially taking out a new loan for every year you’re in school. Because of this, you might get multiple student loans even though you’re one student attending the same school for your entire college career. Some students take out a Direct Consolidation Loan to combine all those federal loans into one easy monthly payment after graduation. Federal loan eligibility Federal student loans are a unique form of debt in that most of them don’t require borrowers to undergo credit checks or meet income requirements. “Federal student loans are available to all students and everyone receives the same fixed rate,” says Streeter. Instead, borrowers qualify if they meet the following criteria: They must be a U.S. citizen, permanent resident or eligible noncitizen. They must have a valid Social Security number (SSN). Students from the Republic of the Marshall Islands, Federated States of Micronesia or the Republic of Palau do not need an SSN. They must be enrolled in or accepted by an eligible institution in a qualifying degree or certificate program. They must be enrolled at least half-time. They must have a high school diploma, GED or recognized equivalent. For graduate students and parents who want to take out PLUS loans, borrowers must undergo credit checks. If they have adverse credit histories — such as recently declaring bankruptcy or foreclosing on a home — they may be denied a loan unless they have a creditworthy individual willing to serve as an endorser on their loan application. How to apply for federal student loans To apply for federal student loans, you must fill out the Free Application for Federal Student Aid (FAFSA). The FAFSA will ask you questions about your income, assets and family size to determine your financial need. Your college’s financial aid office will use that information to create your award package, which may include scholarships, grants and federal student loans. Repaying federal student loans Federal student loans give you a six-month grace period, meaning you don’t have to start repayment until six months after you graduate or drop below half-time enrollment. You’ll get a letter after graduation letting you know how to start repayment with your assigned loan servicer. By default, you’re enrolled in the Standard Repayment Plan after you leave school. You can change your repayment plan at any time. If you’re planning to enroll in Public Service Loan Forgiveness (PSLF), you’ll need to get into an income-driven repayment (IDR) plan or standard repayment plan. Graduated and extended repayment plans are not normally eligible for PSLF, although Temporary Expanded Public Service Loan Forgiveness (TEPSLF) allows these repayment plans if the last year of payments is at least as much as they would have been under an income-driven repayment plan. The remaining debt is forgiven after 120 payments (10 years). If a borrower does not pursue Public Service Loan Forgiveness, the balance is forgiven after 240 or 300 payments (20 or 25 years) in an income-driven repayment plan, depending on which plan you choose. Private student loans While federal student loans come from the federal government, private loans come from private financial institutions, like banks, credit unions and online lenders. Since there’s no universal standard for private student loans, it’s up to each individual lender to determine how much you can borrow, your repayment terms, your interest rate and what you need to qualify. While most federal student loans don’t run a credit check, all private student loans require it. So if you don’t qualify to borrow on your own, you might need the help of a cosigner to be eligible for a private student loan. A cosigner agrees to take out the loan with you. If you fall behind on payments or can’t pay it back, you and your cosigner will see your credit scores drop. For most private student loans, you’ll need a decent credit score and proof you’ll pay the loan back. Repayment terms range from as little as five years or as long as 20 years, depending on the lender and the terms you’re approved for. A private student loan should be your last stop when it comes to borrowing money to pay for school. If you’ve exhausted all your free money and federal aid options, private student loans can cover your funding gaps. But these don’t come with the same protections and repayment options as federal student loans, including deferment, forbearance and income-driven repayment plans. Use with caution. How to apply for private student loans Since private loans are issued by individual lenders, you have to apply for loans by contacting the lender directly and submitting an application, usually through the lender’s website. Many lenders offer pre-qualification tools that allow you to check your eligibility and get a rate estimate without affecting your credit score. 5 key differences between federal and private student loans So which loan is best for you: federal or private? In most cases, federal student loans are a better option. “Private loans — those made by banks and other private lenders — are one of the riskiest ways to pay for college,” says Streeter. “They typically cost more than federal loans and do not guarantee the same consumer protections or repayment options as federal loans.” That’s because federal loans differ from private loans in the following ways: Borrowing limits The government limits how much undergraduate students can take out in federal loans. “The drawback on federal loans is that students are limited to the amount that they can borrow each year, up to a total of $31,000 for undergraduates,” says Joe Orsolini, president of College Aid Planners, referring to dependent undergraduates specifically. “Although some would argue this is actually a plus because it prevents students from overborrowing.” Private loans don’t have that restriction. Undergraduate students usually can borrow up to the school-certified cost of attendance, which may be more than they can afford to repay. Interest rates Historically, federal student loans have much lower interest rates than private student loans. According to Sallie Mae, from February 2021, the average interest rate on their private student loans was 8.42% in 2020, 9.32% in 2019 and 9.10% in 2018. By contrast, the interest rate for undergraduate federal loans disbursed on or after July 1, 2021, and before July 1, 2022, was just 3.73%. Over time, the difference between the typical rates can cost borrowers thousands in additional interest charges. Interest rate types Higher rates aren’t the only issue with private loans. Although federal loans have fixed interest rates that stay the same for the duration of the loan, private student loans can have variable or fixed interest rates. Initial variable rates are often very low, making them an appealing option. However, rates can fluctuate over time, causing the monthly payment and overall repayment cost to increase. Repayment options If you can’t afford your payments, federal loans have more options than private loans. As a federal loan borrower, you can enroll in an income-driven repayment (IDR) plan to get a lower payment. IDR plans base your payments on a longer repayment term and a percentage of your discretionary income. Some borrowers even qualify for $0 payments. If you have private student loans, your options may be limited. Not all private lenders offer alternative payment plans. Even if they do, they tend to be temporary. Loan forgiveness Federal loan borrowers can be eligible for loan forgiveness programs like Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness and IDR forgiveness. Again, PSLF is for borrowers who work for nonprofit organizations or government agencies full-time for at least 10 years while making 120 qualifying monthly payments; these borrowers may qualify for complete loan forgiveness. For Teacher Loan Forgiveness for Federal Stafford Loans, you must teach for five years in a low-income school; STEM and special-needs teachers get $17,500 forgiven and other teachers get $5,000. If you enroll in an IDR plan and still have a balance at the end of your new loan term — 20 or 25 years, depending on the plan — the government will forgive the remainder. Private student loans aren’t eligible for federal loan forgiveness programs. Hardship programs If you lose your job or have a medical emergency, federal loans can be much more flexible than private ones. You may qualify for a federal deferment or forbearance and postpone your payments. Depending on the type of deferment or forbearance you qualify for, you could potentially delay your payments for up to 12 months at a time, for a maximum of three years per deferment or forbearance. Some private student loan lenders offer financial hardship programs, but they are much more restrictive. You can usually only delay payments for one to three months, and total forbearance is typically limited to 12 months or less for the duration of your loan. College financing options If you need to borrow money to pay for college, think about all of your options. “People should consider what the loan payment will be when they graduate,” advises Orsolini. “Too often, people pile on debt that can’t be supported by their chosen career. Make sure you will be able to afford the payment later.” For most borrowers, federal loans are the best choice. While private loans may seem appealing with their low advertised rates, their credit requirements tend to be strict, and they have fewer repayment options and hardship programs if you run into financial issues later on.

Credit cards make payments easier, simplifying everyday life. You don’t have to dig through your wallet for change and can easily make purchases online. In addition, with so many people earning points and rewards, finding ways to have more on everyday purchases can be rewarding. The right credit card fit for your needs is important, but it’s also not rocket science. Below, you’ll find a clear overview of types of credit cards, from cashback or travel rewards cards to secured or prepaid credit cards. 1. Rewards credit cards Cards that offer rewards such as cashback, points, or miles for every dollar spent can be redeemed for various benefits like travel, merchandise, or statement credits. Many of the specific credit cards below, such as travel cards, balance transfer cards, or specialty store cards, fall into the general category of rewards credit cards. You’ll find more on those rewards credit card types below. While the credit cards with the greatest rewards are usually marketed to consumers with good to excellent credit history, there are rewards credit cards with lower bonuses for fair to good credit history as well. These cards may offer a signup bonus when you meet a minimum spend (usually within three months) or a higher reward rate in certain categories. 2. Travel credit cards Travel credit cards are designed for frequent travelers. A common feature of many travel credit cards is no foreign transaction fees, allowing you to use the card wherever your travels take you. While technically a sub-category of rewards credit cards, travel cards offer rewards and perks specifically targeted for frequent travelers. For example, some offer free lounge access at thousands of airport lounges or reimburse you for the cost of TSA precheck. Other common perks include free breakfast during hotel stays or free room upgrades. Travel credit cards also typically offer higher points or miles when you book hotels, flights, or rental cars, although some require you to do it through their dedicated shopping portal for the highest rewards. Popular travel credit cards include: Capital One Venture Rewards credit card The Amex Platinum Chase Sapphire Preferred Chase Sapphire Reserve Citi Premier℠ Card Wells Fargo Autograph Card Bilt Mastercard Discover it® Miles 3. Balance transfer credit cards A balance transfer credit card is a traditional credit card, usually with an introductory or promotional 0% APR offer. These offers range from 12 to 21 months of a 0% APR, encouraging new cardholders to make a big purchase or transfer high-interest debt to the card, helping save on interest charges. Note that most cards charge a balance transfer fee, usually 3% to 5% of the balance transferred. That means if you transfer $5,000 in debt, you’ll typically pay a fee of $150 to $250. However, if you need a year to pay off that debt, the interest savings could be worth it. Popular balance transfer credit cards from March 2024 include: Discover it Cash Back Wells Fargo Reflect Card U.S. Bank Visa Platinum Card Citi Diamond Preferred Card Citi Double Cash Card Citi Simplicity Card Bank of America Customized Cash Rewards credit card 👉 Learn More: Best Balance Transfer Credit Cards for Fair Credit 4. Secured credit cards Secured credit cards are geared towards individuals with limited or poor credit history. These cards require a security deposit as collateral and can help establish or rebuild credit when used responsibly. Secured credit cards typically have lower credit limits than traditional credit cards. While you could technically put a deposit of up to $10,000 on a secured credit card, most consumers don’t go above $1,000. And there’s usually no reason to unless you want to make a large purchase on the secured credit card. Many major credit card issuers offer a secured credit card option, including: Discover it Secured Credit Card U.S. Bank Cash+ Secured Visa® Card Capital One Quicksilver Secured Cash Rewards Credit Card Bank of America Unlimited Cash Rewards Secured Credit Card 👉 Learn More: Best Credit Cards for No Credit 5. Student credit cards Student cards are tailored for students with limited credit history. These cards typically offer features like lower credit limits, no annual fees, and rewards geared toward student spending habits. A student credit card is an excellent option for a first credit card. With no annual fees, you could use it to build your credit history and keep it open to maintain your length of credit history—helping to build your credit score over time. Good student credit cards include: Discover it Student Cash Back Bank of America Customized Cash Rewards credit card for Students Capital One Quicksilver Student Cash Rewards Credit Card Capital One SavorOne Student Cash Rewards Credit Card Bank of America Travel Rewards credit card for Students Bank of America Unlimited Cash Rewards credit card for Students 6. Business credit cards Business credit cards, as the name implies, are designed for small to medium-sized businesses and entrepreneurs. These cards offer perks such as expense tracking tools, employee cards, and rewards for business-related spending. A business credit card can help small businesses separate personal and business expenses. In addition to offering better rewards than personal credit cards, business credit cards are one of the simplest ways for businesses to access capital. They give companies of all sizes a simplified solution for easily reviewing transactions, tracking expenses, and documenting activity. Some of the best business credit cards include: Ink Business Unlimited Credit Card The Business Platinum Card from American Express Venture X Business Capital One Spark Miles Select for Business Ink Business Cash Credit Card 7. Specialty store credit cards With specialty store cards, retailers partner with a lending bank to offer a revolving line of credit to make purchases at that specific retailer. These might include retailers such as major department stores or clothing stores, gas stations, or other co-branded cards. A common feature of a specialty store credit card is that it typically offers better rewards, points, or discounts when used at that retailer. For example, gas cards usually offer rewards or discounts on gas purchases. Sometimes, a store credit card is limited to use at its issued retailer, although many store cards can be used at other retailers without the same rewards. Some of the biggest retailers offer specialty store credit cards. The most popular specialty store credit cards as of April 2024 include: Capital One Walmart Rewards Card Costco Anywhere Visa Card by Citi Amazon Prime Visa Target RedCard Lowe’s Advantage Card Gap Good Rewards Mastercard Home Depot Consumer Credit Card My Best Buy Visa Card Amazon Business American Express Card 8. Cashback credit cards Another subset of rewards credit cards are cashback cards that offer a percentage of all eligible purchases as cashback. This allows you to access direct monetary rewards redeemed as statement credits, checks, or deposits into bank accounts. Most cashback credit cards offer a base rate of 1% cashback, but some may offer higher rates in certain categories or with other conditions. For example, the Citi Double Cash Card offers 1% cashback on purchases and an additional 1% cashback when you pay off those purchases, while the Citi Custom Cash card offers 5% cashback in your highest spend category. Other popular cashback credit cards include: U.S. Bank Cash+ Visa Signature® Card Discover it Cash Back Chase Freedom Flex Bank of America Customized Cash Rewards credit card Chase Freedom Unlimited Wells Fargo Active Cash Card 9. Low-interest credit cards Cards with lower ongoing interest rates are rare, but you can find them. These cards are suitable for cardholders who carry a balance and want to minimize interest charges over time. Of course, paying off your credit card in full each month can help you avoid interest charges altogether; a low-interest credit card is a reasonable solution if you have to carry a balance from month to month. Some of these also come with a 0% APR balance transfer offer. Remember that these cards often still have higher interest rates than a personal loan (after any introductory period), so consolidating debt could be a better solution if you have to carry the debt long-term. Options for low-interest credit cards include: Chase Slate Edge Citi Diamond Preferred Card Blue Cash Everyday Card from American Express Wings Financial Visa Platinum Credit Card The Plum Card from American Express 10. Premium credit cards Premium credit cards are high-end cards with exclusive perks and benefits, such as concierge services, luxury travel amenities, elite status with hotels and airlines, and high reward rates. However, you pay for these premium features as they also often come with substantial annual fees. However, if you will use the services offered, the higher fees can be worth it. Top premium and luxury credit cards include: The Platinum Card from American Express U.S. Bank Altitude Reserve Visa Infinite Card Hilton Honors Aspire Card from American Express Chase Sapphire Reserve Capital One Venture X Rewards Credit Card Delta SkyMiles Reserve American Express Card United Club Infinite Card 11. Prepaid credit cards Prepaid credit cards are loaded with funds by the cardholder and can be used for purchases like a regular credit card, but they are not tied to a line of credit. They’re often used by individuals who want to control their spending or those who don’t qualify for traditional credit cards. You can get prepaid credit cards directly from Visa or Mastercard, as well as retailers like Target and Walgreens. How to choose the right type of credit card Choosing the right type of credit card requires careful consideration of your financial goals, spending habits, credit history, and personal preferences. While it requires some research, it’s not rocket science. Consider a few key criteria: Are you in the market for a reward credit card, or do you need to build credit with a secured, prepaid, or student card? If you want a rewards credit card, do you know your credit score? Do you qualify for a card that requires good to excellent credit? Do you prefer cashback, travel rewards, or store rewards? Do you want a card with no annual fee, or do the rewards justify the annual fee for your lifestyle? Of course, if the credit card is for your business, you’ll want to look at the best business credit card offers to narrow down your options. Based on those criteria, you can usually narrow down the type of credit card for your current needs. While it’s usually not a good idea to apply for more than one credit card every three to six months, there’s no reason you can’t apply for another later. For example, you might choose a travel rewards credit card now and a cashback credit card later, or vice-versa. Should You Have Multiple Credit Cards? Credit cards of all types offer a practical way to make purchases online and in stores. Choosing different types of credit cards at different times can make sense for many consumers and for building a strong credit score at different phases of life, with responsible use. You could use the cards for specific rewards, to maximize signup bonuses, or to separate business and personal finances. Credit cards also make it easier to track expenses and get a clear picture of spending categories. Choosing the right credit card for your needs is a personal decision, but regardless of the card you choose, it’s important to follow good credit-building habits. Find more tips to use credit wisely or learn to improve your credit score in three months to access more credit card options. FAQs What are the different types of credit cards? Many major banks offer a range of cards focusing on different consumers. You’ll find a diverse range of cards to meet your needs. For example, you can find secure or prepaid credit cards, student cards, travel or cashback rewards cards, business credit cards, balance transfer credit cards, and more. How many different types of credit cards are there? There are 11 different types of credit cards. These include everything from specialized rewards credit cards from major retailers, airlines, or hotels to cashback cards and credit cards designed to help you build credit or consolidate debt. You can find an overview of all these cards above. What type of credit card should I get? The type of credit card you should get depends on your financial situation, credit score, and rewards goals. You can compare credit card types in the MoneyLion app. What are the main types of credit cards? In a broad sense, the main types of credit cards are cashback cards, travel rewards cards, debt consolidation cards, and credit-building cards. The latter categories can help consumers with low or no credit scores build credit. Rewards and cashback cards are offered for consumers with a wide range of credit scores. How many different types of credit cards should I have? According to Equifax, one of the three credit bureaus, having two to three credit cards at a time is generally recommended. However, that varies widely by financial goals and personal considerations. Some people prefer a single credit card, so it’s easy to keep track. Others are passionate about travel hacking as a hobby and may have 10 credit cards or more, but most people are somewhere in between.

Student loan deferment allows borrowers to temporarily pause monthly payments without penalties or negative credit impacts. During the COVID-19 pandemic, the federal government implemented a deferral program where interest did not accrue, providing relief. However, this program is set to expire, requiring borrowers to resume payments. Deferment periods typically cause interest to accumulate, increasing the overall loan balance. The Biden administration announced a student loan forgiveness initiative providing up to $10,000 or $20,000 (for Pell Grant recipients) in federal loan forgiveness for eligible borrowers based on income thresholds. Remaining balances will be re-amortized, potentially lowering monthly payments.