Recent investigations by Congress and the New York attorney general about the interactions between colleges and private student-aid lenders have revealed many conflicts of interest, as lenders have offered free trips, gifts and other monetary enticements to colleges and college officials to get them to steer students toward certain loans. It showed a grim side to an industry that for many students provides the only way they can afford the ever-increasing cost of higher education.

Yet not all lenders are illegally trying to entice students by influencing their colleges, or participating in other questionable practices. Most loans are structured in such a way as to give the most aid possible to the student with the minimum financial burden afterward.

According to the CollegeBoard, the non-profit organization that produces the SAT, 54 percent of all financial aid comes in the form of loans. Also, almost all loans have some sort of grace period beginning after graduation before they have to be paid back.

There are two types of loans available: federal and private. Some loans are need-based, and others are designed to help pay the family share of college costs. While colleges vary in terms of the types of private loans they offer, there are only four types of federal direct student loans: Perkins Loans, Subsidized Stafford loans, Unsubsidized Stafford loans, and Grad PLUS loans. A direct loan is a low-interest-rate loan where the lender is the U.S. Department of Education rather than a bank or other financial institution.

There is also a difference between loans available to undergraduates and those available for graduate students.

Selena Healey, the associate director of financial aid at American University, said graduate students can borrow more money.

“An undergraduate student can only get the PLUS loan if their parent is willing to borrow on their behalf. A graduate student, however, can borrow using the Graduate PLUS loan up to the full cost of attendance.”

For example, she said, a dependent freshman can only borrow up to $3,500 from the Federal Direct/Stafford Loan program. A graduate student can borrow up to $20,500 from the Direct/Stafford Loan program.

However, there is no grace period on the PLUS loan. Repayment begins immediately after graduation, and the interest rate is fixed at 7.9 percent.

A subsidized loan is the best way to go, Healey said, because the government pays the interest rate while the student is in school.

“That saves the student money in the long run,” Healey said. “The interest rate once the student enters repayment is also fixed. And, if the student returns to school to pursue a higher degree, the government again pays the interest on the loan while the student is enrolled at least half time in an eligible program.”

Federal loans have an advantage over private loans because they have a fixed interest rate. While some private lenders may advertise an interest rate lower than the federal rate, Healey said it will probably change.

“If a student has a strong credit history or has a co-signer with strong credit, then it is possible to find an alternative loan with an interest rate lower than the federal interest rate. This can look attractive to a student in the short run. However, many alternative loans have variable interest rates, so even though the rate may be attractively low now, there is no guarantee that it will stay there.”

For graduate students, choosing a loan is often one of the first major financial decisions they have to make without the help of their parents.

Kelly Carroll, a 23-year-old Boston University graduate student, said she had no undergraduate loans because of scholarships and her family’s ability to pay, but is already close to $50,000 in debt from her grad school loans.

She said the majority of her loans are Stafford Direct and Grad PLUS. She said she knew BU was the lender for her PLUS loan, but confessed ignorance to the workings of the financial aid system. She said she initially tried to take out a private loan from a bank that BU didn’t accept.

“I wanted my parents to be cosigners, so the burden wouldn’t all be on me,” Carroll said, but the PLUS loan has no cosign option.

“My mom is paying off the interest as kind of a gift, so payment will be a little less than what it could be,” Carroll said.

Healey said graduate student use of federal loans has increased because of the availability of the Grad PLUS loan.

“Graduate students are using more federal loans and less alternative loans now that the Graduate PLUS loan is available to them,” she said. Before the 2006-’07 school year, the only PLUS loans available were for parents.

But alternative loans still are attractive to many undergraduate students.

“Undergraduates still use alternative loans because they are more limited in what they can borrow from the federal loan programs,” Healey said. “Most students, however, will minimize their alternative loan borrowing by applying first for the federal loans if they are eligible for federal aid.”