Student Federal Loan

By: EconomyWatch Content   Date: 25 November 2009

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A student federal loan allows students and their parents to borrow money to help pay for college through the various loan programs supported by the federal government. Such loans are highly popular amongst students because of their low interest rates, simple repayment terms, benefits and deferment and forbearance options.

Delivery of Student Federal Loan

Astudent federal loanis delivered to students through the Direct Loan and Federal Family Education Loan Programs run by the US government. The loans offered under the two programs are essentially similar and the disbursement of the funds is done by the borrower’s school.

These loans are sanctioned on the basis of the information submitted in the Free Application for Federal Student Aid (FAFSA). Once a student has identified the schools in which he is interested in studying, the information provided in FAFSA is passed on these schools. A review of one’s FAFSA application helps in deciding the amount of loan available and the lender to be chosen. 

Types of Student Federal Loans

The various types of student federal loan programs available include the following:

 

Federal Perkins Loan is a need based loan for undergraduates and graduates. A major chunk of this loan is provided by the government, with the school contributing only a small portion.

Federal Stafford Loan can be subsidized or unsubsidized, and is available to undergraduate and graduate students. No credit check is required for such loans. In the case of subsidized loans, the federal government pays the interest on the loan six months after the student leaves the school or is no longer enrolled for at least half the time. In the case of unsubsidized loans, the responsibility of interest payment lies totally with the student.

Federal PLUS Loans are available for parents who need funds to supplement the funding requirements of their dependent children, and graduate and professional students. Students can borrow under this program only after they have used the option to borrow the maximum amount available under the Stafford loans. These loans require a credit    check and, in some cases, an eligible co-signor. Repayment of the PLUS loans begins after the final disbursement of the loan has been made.

Federal Consolidation Loans allow combination of multiple student federal loans into one loan with a single monthly payment. Private education loans can not be consolidated.

 


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