Student loans come in two primary flavors - Federal loans and private loans. I'm starting with Federal since there's only one source making it easier to know what's up. Federal loans are sometimes need-based and come straight from the Department of Education. They seem to be generally perceived as the safe bet - lower fees, interest rates and better terms. Undergraduate students have different programs and terms and will usually have parent finances considered unless they are an independent student.
The Department of Education offers several different loan programs. You can't borrow more than your cost of attendance minus any other financial aid. So say your school says its student budget is $100,000. That would include tuition, fees, books and estimated cost of living. Then the school is really nice and gives you $40,000 in grants. You can only borrow a total of $60,000 from the Feds ($100,000-$40,000).
Federal Loan Programs:
Stafford Loans
Direct Subsidized Stafford Loans
Need-based, amount determined by school
Up to $8,500 per year
Max: $65,500
Interest rate: 6.8% fixed
Fee: 1%
Do NOT accrue interest while in school more than half time, during grace periods or while deferred
Direct Unsubsidized Stafford Loans
Not need-based, amount determined by school
Up to $20,500 per year (includes subsidized up to $8,500)
Max: $138,500 (includes subsidized up to $65,500)
Interest rate: 6.8% fixed
Fee: 1%
Interest accrues starting when first paid out. You can pay the interest while you are in school and during grace periods and deferment or forbearance periods, or you can allow it to accrue and be capitalized (that is, added to the principal amount of your loan). If you choose not to pay the interest as it accrues, this will increase the total amount you have to repay because you will be charged interest on a higher principal amount.
PLUS Loans
Not need-based, amount determined by student
Max: Cost of attendance (aka the $100k from the example above) minus other aid (for an example total of $60,000 in PLUS loans)
Interest rate: 7.9% fixed
Fee: 4%
So it looks like subsidized Stafford loans are by far my best option on the Federal side. Interest free while in school is pretty nice and the fee isn't exorbitant, but enough to ensure that the loan isn't really free money.
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