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Introduction to Federal Student Loans for Education

After high school, many students are unsure of what to do with their lives. They have the option of going to work or enrolling in college. Many who want to enroll in college do not have the money that it takes to pay for tuition. In this situation, students can borrow much of the money they need from federal student loans. If you are about to graduate from high school or you are thinking about going back to college, understanding how student loans work can be extremely helpful.

Direct Loan Program

The federal government offers a Direct Loan Program through the Department of Education. With this program, the federal government loans money directly to students, with the help of loan servicers. This means that when you borrow money from the Direct Loan Program, you’ll be able to get any help you need from an individual loan servicer instead of having to deal with the Department of Education.

Types of Student Loans

When you want to get involved with federal student loans, there are a few different types of loans that you could pursue. Two of the most common types of loans are Stafford and Perkins loans. Stafford loans are typically available to anyone who wants to go to school, regardless of credit history or income. With Stafford loans, you can get a subsidized loan or an unsubsidized loan. Whether you qualify for a subsidized loan will depend on the information contained in your Free Application for Federal Student Aid or FAFSA. If they determine that you have a significant financial need, then you can qualify for a subsidized loan. This means that your interest will be paid while you are in school, and your loan interest rate will be lower overall.

The Perkins loan is a similar type of loan, except it is only for individuals who have a significant financial need. There is a maximum amount of money that you can borrow each year with the Perkins loan program. If you still need to borrow money after the Perkins loan, you can use a Stafford loan.

PLUS loans are another type of federal education loan that you can get from the government. These loans are designed for parents of college students or for graduate students. Eligibility for this type of loan is also determined with the information from the FAFSA.

You also have the option of getting a consolidation loan from the government. With this type of loan, you can consolidate multiple student loans into a single package. The only have the option of consolidating once, so you need to make sure that you do it at the right time to get the best interest rate.

You may also be able to qualify for state-based student loans. These loans are actually issued from state governments and agencies instead of the federal government. Minnesota, Texas, Hawaii, New Jersey and Alaska are the five states that offer this type of program.

Considerations

Getting education loans from the federal or state government can provide you with cheaper interest rates than what you can get in the private market. They are also easier to get qualified for because you do not have to have a certain amount of income or credit score. The repayment terms of these school loans can also be very flexible. You have the option of choosing from a fixed payment, a graduated payment or an income-based repayment option. If you are interested in going to college, looking into federal loans should be one of the first things you do. After scholarships, grants and other sources of funding have been exhausted, they are often the most attractive option.

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