This is the time of year when colleges start sending their bills out to new and returning students. And that’s why this is also the time of year when parents and students begin inquiring about college loans.

This is as good a time as any then  to answer some questions about Stafford Loans, which are the most popular federal college loans, as well as the best loans out there for students.

Stafford Loan Questions

Question No. 1: Are there different kinds of Stafford Loans?

Yes. There are unsubsidized Stafford Loans and subsidized Stafford Loans.

The best loan to get is the subsidized Stafford. The student loan interest rate on subsidized Stafford is lower. Beginning July 1, the interest rate will be 3.4%, which is a phenomenal deal. In comparison, the student loan interest rate on an unsubsidized Stafford is 6.8%.

Here’s the other important difference: Students who qualify for a subsidized Stafford Loan don’t have to pay the interest that accrues while the student is in college. The federal government pays for all this interest. Borrowers through the other Stafford don’t get this cushy deal.

Question No. 2: How do you know if you qualify for a subsidized Stafford or an unsubsidized Stafford loan?

Your college will tell you. Look on the financial aid package that your college sends you. In the package you should see what the breakdown of subsidized versus unsubsidized Stafford loans are. The majority of subsidized Stafford Loans are awarded to students whose family’s adjusted gross income is less than $50,000.

A federal formula is used to determine if a student, based on a family’s finances, is eligible for the better subsidized deal. You may see both kinds of Stafford Loans in your package.

Question No. 3: When should I apply for my federal student loan?

You can ask your college’s financial aid office, but the new year for federal student loans start July 1.

Question No. 4: What happens if I need to borrow more than the Stafford loan program allows?

Federal student loans are the superior loans — by far — for students who need to borrow, but there are limits to how much you can borrow. I’ll be covering other student and parent loan options soon.

More on Student Loans:

College Debt: Don’t Borrow More Than $27,000

12 Facts About Student Loan Borrowers

5 Things You Need to Know About Private School Loans

Lynn O’Shaughnessy is the author of The College Solution and she also writes a college blog for CBSMoneyWatch.com. Follow her on Twitter.

I’ve had a lot of parents  asking me lately  about whether they should give the green light to their children, who have been accepted into expensive schools without enough financial aid. In response, I want to share a cautionary post that I wrote for my other college blog over at CBS MoneyWatch.

Here is part of that post:

Here is the ugly side of runaway college costs: A frightening number of student loan borrowers can’t repay their federal college debt on time.

According to a new report by the Institute for Higher Education Policy, nearly two out of five student loan borrowers were delinquent on their payments at some time during their first five years of repayment. To be considered delinquent, a borrower’s payments must be 60 days late.

Actually, the news is even grimmer than that. To avoid delinquency, nearly a quarter of borrowers legally postponed their payments.

Here, however, is the reality that I found most shocking:  Only 37% of borrowers, who began repaying their federal student loans in 2005, have managed to make timely payments without getting into trouble. That means nearly two out of every three borrowers have been struggling!

The statistics are even more disturbing because students are increasingly borrowing to pay for college. About two-thirds of students are borrowing for college and they are graduating with an average college debt of $24,000.

You can read the rest of the post here:

2 Out of  3 Student Loan Borrowers Are Struggling

Be health conscience. Eat a coconut every day.

I’m in Jamaica, where I’ll be the featured (and apparently heavily promoted) speaker at a first annual college conference in Kingston.

What could I possibly tell these Jamaican teenagers and their families about college? That’s what I was wondering when Sandra Bramwell-Riley, who operates Versan Educational Services, asked me to fly to Jamaica.

Sandra told me that there are a lot of American families who live in Jamaica and they are as clueless about their college choices as those living in the United States.

At a quasi press conference today with Jamaica journalists, I did mention that lots of colleges and universities in the United States provide financial aid to international students. Here is a list of colleges and financial aid statistics for international students that I find particularly valuable:

International Financial Aid

I haven’t seen a beach yet, but I have learned that student loans in Jamaica can be stunningly high. The concept of college loans is new in this country where there are no government student loans.

In extreme cases, parents, who can’t afford college bills, have sold their homes to be able to send their children to college. American families here have also made incredible financial sacrifices not knowing about the possibility of financial aid.

What really blew me away was hearing what the interest rate is on some private bank loans for Jamaican families – 19% and the pay back period is six years. And I thought private student loans in the United States were scary.

In other news:

The WSJ on Campus and Unigo.com are sponsoring a free webinar tonight entitled, The Secrets of College Admissions: What You Need to Know to Get In.

I just read about that scary reality on The Wall Street Journal’s website.

According to Mark Kantrowitz, the financial aid guru over at FinAid and Fastweb, Americans owe about $829.7 billion in student loans. In comparison, consumers owe $826.5 billion in revolving credit card debt.

Most of the college loan debt –  $605.6 billion — is owed on federal student loans. Private student loans are in a distant, but troubling, second place. These numbers, by the way, don’t include the debt that parents absorb when their kids head to college.

College loan debt is scarier than credit card debt because it can hardly ever be discharged in bankruptcy. The penalties for students, who fall behind with their student loan payments, are nothing short of draconian. You can read heart-breaking stories of student-loan casualties at Student Loan Justice.

Students who take out federal loans are in better shape than those who carry private college debt. I was just telling a friend this week about a fairly new federal program called Income-Based Repayment Plan that can help reduce the student debt burden at least temporarily. There are, however, no magic bullets for students who have overdosed on private loans.

What’s equally frightening, is how heavily college students have been turning to loans recently. Kantrowitz estimates that students have accumulated $300 billion in federal student loan debt in just the past four years.

Here are some posts that I’ve written recently on college loans:

A Cheat Sheet for Repaying Student Loans

Best College Loan Advice: 9 Tips for Borrowing for College

5 Things You Need to Know About Private Loans

Lynn O’Shaughnessy is the author of The College Solution, an Amazon bestseller, and she also write college blogs for CBSMoneyWatch and US News. Follow her on Twitter.

The best loan for students is the federal Direct Stafford Loan. Earlier this month, I wrote a post that provides lots of links to my past advice on student loans, as well as education loans  for parents.  If you missed it, here it is:

What is the Best Student Loan? Here’s the Answer

Today, however, I want to share another way for parents to borrow – a home equity line of credit.

Home Equity Line of Credit

For parents, a home equity line of credit will often be the best bet for college borrowing.

I got my line of credit expanded about 1 1/2  years before my daughter Caitlin (now a college senior) graduated from high school. I wanted it available in case I needed to borrow for college.  Last time I checked, I had a 2.5% interest rate on my line of credit. I received the line  from Charles Schwab at prime rate minus 1 percentage point of interest. It was a sweet deal.

If you itemize, the interest on these lines of credit may be fully deductible on your income tax return.

The reason why the interest rates on home equity loans are usually lower than many education loans is because your house serves as collateral for the loan. There is no collateral for federal or private student loans.

If you don’t have a line of credit and your children are in high school, you might want to shop for home equity lines. When contacting financial institutions, don’t forget about credit unions. Check out this guide on how to shop for home equity lines from the Federal Reserve Board.

1. First, read this week’s posts on student and parent loans:

5 Things You Need to Know About Private School Loans

College Loans: When Parents Need to Borrow

4 Things You Need to Know About Federal Student Loan

Federal Student Loans: Where Do I Apply

2. Head over to Student Lending Analytics, which provides an unbiased look at private student loan options.  The website rates private student loans with a star system. (Please note that the loan with the worst rating belongs to Sallie Mae, which has been the student lending goliath and big bully in this industry.

One of the best things about Student Lending Analytics, an independent research and advisory firm, is that it isn’t affiliated with any college loan lenders nor does it receive any payments from them.

3. Check out credit unions. These financial institutions may provide you with better rates than you can find with the major private student loan lenders. Currently the top three college lenders on Student Lending Analytics list are all credit unions.

4. Some states operate their own private loan programs. Tim Ranzetta, the founder of Student Lending Analytics, cautions families not to assume that a state program will always offer the best rates. Shop around!

Here are states with private college loan programs:

Alaska, Connecticut, Hawaii, Maine, Massachusetts, Minnesota, New Jersey, North Carolina, North Dakota, Texas and Vermont.

5. Think about when you will start repaying the loan. You will save thousands of dollars if you start repaying the loan while in school.

6. Remember:  Private college loans should always be a last resort. Exhaust all other options first!

Lynn O’Shaughnessy is the author of The College Solution, an Amazon bestseller, and she also writes a college blog for CBSMoneyWatch. Follow her on Twitter.