Federal Student Loans
Students and parents/guardians use Federal Student Loans, also known as government loans, to fund college or graduate school with the help of the government.
Even if you are working with a limited budget, you still deserve the big rewards of a solid education. Below you will find the different types of federal loans and their eligibility requirements. Pay close attention to the details since they often eliminate some options right off the bat.
Tip:
Over the last 30 years, tuition costs at public four-year colleges grew from $4,160 to $10,740
Direct Subsidized Federal Loan
- Historically known as Stafford loans
- Eligible undergraduate students must demonstrate a financial need
- The Department of Education covers the interest that accrues on your loans while you are enrolled at least half-time in school
- You will find the amount you are approved to borrow in the college award letters
Direct Unsubsidized Federal Loan
- Available to graduate and professional students
- Not based on financial need or merit
- Everyone who is enrolled at least half-time in school is eligible
- You are responsible for paying the accruing interest while enrolled, as well as if you request a grace period or while you are in deferment or forbearance
- If you miss a monthly payment, the interest will be added to the principal of the original loan amount
Upon graduation, you can combine multiple federal loans into one
Save time by managing one monthly payment instead of juggling multiple payments
You have up to 30 years to repay your loans, which can lower your monthly payment amount
Direct Grad PLUS Loan
- For graduate and professional students who have had more time to build up their credit score
- Requires a credit check
- Offers a six-month grace period after graduation before you need to begin repayment
- If you have an adverse credit history, you may still qualify if you:
- Find an endorser who agrees to repay the loan if you don’t
- Can document extenuating circumstances that caused your adverse credit history
- Agree to complete credit counseling
Having someone endorse your loan is essentially promising the lender that if you can’t meet the loan’s payment and repayment requirements, you have someone else who can and will. This is especially important if you have an adverse credit history (which means you are 90 or more days late on repaying a debt of any kind) of at least $2,085. Or if you have experienced a default, bankruptcy discharge, repossession, foreclosure, wage garnishment, tax lien or federal student aid write off during the last five years.
Direct Parent PLUS Loan
- Helps biological, adoptive and stepparents support their dependent undergraduates
- Parents are expected to make payments while their children are in school, though they may request deferment during the loan application process
- Parents cannot transfer a PLUS loan to their children
Looking At Both Sides Of The Equation
Pros of Federal Loans
A good option for people with poor credit because no credit history is needed
The loan is automatically cancelled if the borrower dies
No co-signer needed
Offers repayment plans based on your income and loan forgiveness programs
Includes forbearance, which means you can temporarily reduce your monthly amount and make up for the missed payments later
You have the option of changing your repayment plan
Offers fixed interest rates that are lower than private loans
You can miss three payments before being considered delinquent
Cons of Federal Loans
The government can garnish your wages and federal tax returns if you default on your loan
The amount you can borrow is set by congress and might not cover all your costs
Requires you to repay what you borrow, PLUS interest
If you have excellent credit, you could find lower interest rates with a private loan
There Are Many Types of Student Loans
The two main types of student loans are federal and private. Within each type are subsets that might appeal to you based on your credit history, financial need, and other factors.
Federal loans were established to help students with limited funds, or a poor credit history, receive a good education. Private loans offer customized options to students with a strong credit history.
Federal Student Loans
Private Student Loans
Fees
Borrowing Limits
Interest Rates
Cancellation Policy
How to Apply for a Federal Student Loan
How to Apply for a Private Student Loan
Repayment Options for Federal Student Loans
Repayment Options for Private Student Loans
Forgiveness Options for Federal Student Loans
Tax Implications
Pay off your Student Loan Debt
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