College isn't cheap. Fortunately, it's fairly easy to obtain student loans to cover the costs of getting a higher education. Unfortunately, while student loans remove the financial barrier to attending college, they often come back to bite those who failed to properly research all the available options.

There are three primary types of student loans: federal loans made directly to the student, federal loans made to the student's parents, and loans from private financial institutions like banks.

The three primary types of student loans all carry different payment schedules, loan limits and interest rates, so it is important to choose carefully based on your specific needs and ability to repay the loan. There is no worse feeling than graduating college ready to take on the real world, only to realize you will be doing so with one arm tied behind your back due to the burden of hefty monthly student loan payments.

Direct Federal Loans

If you already have money saved to pay for most or even part of attending college, or will be able to earn enough money during your college years to cover some of the costs, then a direct federal loan is probably your best option.

Federal loans made directly to the student have a fairly modest limit, preventing the inadvertent accumulation of an overwhelming debt. Furthermore, depending on your financial situation, the government may subsidize a federal loan by doing away with interest all together.

Going with a direct federal loan may mean a more busy lifestyle during college, especially if you have to work long hours to make up the difference, but the far more manageable loan payments following graduation are sure to put a smile back on your face.

Federal Loans to Parents

The primary benefit of a federal loan made to one's parents is the ability to borrow a far more substantial amount of money, making this type of loan a natural choice if you will be attending a particularly expensive university.

However, payments on a federal loan to a student's parents must begin immediately, and legal responsibility for repayment rests on the parents alone. Federal loans to parents also carry a sizable 8.5% interest rate.

Private Student Loans

Private student loans offer the best of both types of federal loans with their higher limits and ability to start repaying only after graduation. But, private student loans are also the easiest way to accidentally build up a massive debt that could take the next 20 years after graduation to pay off.

Private student loan applications are processed fast and require little if any proof of the actual need for the amount requested, making private student loans by far the most popular method of financing higher education. As a result, an ever growing number and type of financial institutions are offering competitive loan packages.

The rapid application process and lack of lending safeguards are also precisely what can lead to trouble with private student loans. All too often, additional funds are borrowed for what may seem like a good idea during college, but in retrospect was an unnecessary temporary luxury leaving nothing but more debt.

Private student loans are not a bad way of financing your education, but they should be entered into with careful planning and caution.

One way to avoid the pitfalls of direct-to-consumer private student loans is to instead apply for what is known as a school-channel private loan. School-channel private loans take longer to process, but generally offer lower interest rates and the money goes directly to the school to cover education costs only.

Conclusion

Whatever your financial situation and needs, there is a student loan out there for you. But like with any important financial decision, steering clear of the risks associated with student loans requires a bit of research and planning.