Student Loans Have Differences You Should Review Carefully Before Accepting the Money

It’s important to research every loan offer, many have hidden costs and fees

Applying for student loans can be daunting. In North Carolina, where tuition and living costs keep rising, choosing the right loan mix can save you thousands. Understand each offer’s interest rate, fees, repayment options and forgiveness provisions before you commit.

Federal versus private student loans

Federal loans, Direct Loans, Federal Family Education Loans and Perkins Loans—are backed by the U.S. Department of Education and include benefits like fixed interest rates, income-driven repayment and cancellation options. Private or alternative loans come from banks and credit unions, often with higher rates, fewer protections and limited repayment flexibility. Always exhaust federal aid—including grants and work-study—before turning to private lenders.

Overview of federal Direct Loans

• Subsidized Direct Loans are based on documented financial need; the government pays interest while you’re in school.
• Unsubsidized Direct Loans have fixed rates but accrue interest from disbursement; you may capitalize unpaid interest.
• Direct PLUS Loans are available to parents of undergraduates and to graduate students; credit checks apply and they carry higher rates.
• Direct Consolidation Loans let you combine federal loans into one payment but may extend repayment and increase total interest.

Federal Perkins Loans

Perkins Loans, offered by participating schools to students with exceptional need, have low fixed rates and generous cancellation terms. Check if your North Carolina college still participates, as the program has phased out at some campuses.

How much you can borrow

Undergraduates may borrow up to $12,500 per year in subsidized and unsubsidized Direct Loans, plus up to $5,500 per year in Perkins Loans (if available). Graduate students can take up to $20,500 per year in unsubsidized loans and additional PLUS Loans to cover remaining costs. Parents can borrow via PLUS for remaining undergraduate expenses.

Compare total costs

Look at each loan’s Annual Percentage Rate (APR), origination fees and repayment plan options. Private loans often charge origination fees up to 5 percent and impose variable rates. They lack federal forgiveness or deferment options for hardship, so weigh short-term savings against long-term risk.

Watch for deceptive marketing

Some private lenders use government-like seals or names to imply federal backing. Never share personal data unless you confirm the lender’s identity, check licensing at ncdoi.gov and search the North Carolina Attorney General’s complaint database before signing.

Beware high-pressure sales tactics

If a lender urges you to close quickly to lock in a rate, pause and read all terms. Fixed rates, variable rates, prepayment penalties and discount requirements for autopay should be clear in writing. Take time to compare multiple lenders and nonprofit counseling services.

Discounted rates may have strings attached

Interest rate reductions often require automatic payments, minimum balances or perfect payment history. Confirm how long discounts last and whether they survive a loan sale to another servicer, sold loans can lose benefits.

Think twice before private consolidation

Rolling federal and Perkins loans into one private loan sacrifices federal benefits like income-driven plans and Public Service Loan Forgiveness. Only consolidate federally if you need a simpler single servicer; use private consolidation sparingly and after comparing all options.

North Carolina resources

• NC Attorney General Consumer Protection Division: file lender complaints and get guidance
• NC Office of Student Financial Aid: state grant and scholarship info at scsa.nc.gov
• Federal Student Aid (studentaid.gov): official federal loan details and repayment calculators
• HUD-approved housing and financial counselors: free FAFSA and loan counseling through local nonprofits

By understanding each loan’s features and using North Carolina’s resources, you can secure funding without unexpected surprises and build a manageable repayment plan.