A lot of students tend to take out loans to assist with their payments for college. Federal student loans are loans meant for students that are made available by the U.S. government and tend to have more flexible loan terms when compared to other sources from which loans can be gotten. When you decide to apply for financial aid, you can be granted a loan as part of your institution’s financial aid offer. A loan is considered to be money borrowed and must be paid back with a particular interest.
Before taking any form of loan, ensure you have an in-depth knowledge of who is making the loan and the terms and conditions attached to it. Taking a student loan can come in any form, such as from private sources, the federal government, or any other financial organization. The type of loan gotten from the federal government is referred to as a “federal student loan,” and it is known to be of more benefit than other sources. In order to apply for it, you will be required to fill out and complete the Free Application for Federal Student Aid (FAFSA).
Generally, there are two major types of student loans available: We have a private student loan and a federal student loan. These types of loans are quite different from each other, and it is essential to know the difference between them. Private student loans are made by private lenders, including online lenders and banks. In cases where a student is dealing with a private student loan, one can settle it using debt settlement, as it is a much easier approach to settle that kind of debt.
Understanding Federal Student Loan
Firstly, to qualify for a federal loan, you will be required to fill out and complete the FAFSA. As a student seeking a loan, you will need to answer a couple of questions concerning the student’s and parents’ income and investment, and various other important details that need to be known in order to determine your eligibility.
A federal loan is considered to have a fixed interest rate and it also grants borrowers a considerable payment plan. When compared with federal loans, private loans are not based on any form of financial requirement. However, one might need to qualify for it by passing a credit check. For those with poor credit scores, they might need to get a cosigner before they can be qualified for the loan.
Types of Federal Student Loans Available
There are various types of federal loan programs that are granted based on certain criteria, such as financial need. However, there are four major types of federal student loans offered by the U.S. Department of Education.
i. Direct Subsidized Loans
This type of loan is made available to undergraduate students who have, in one way or another, shown financial assistance to aid in covering the cost of higher education at a career school or college. While in school, the interest on the loan is taken care of by the government. The benefit of this federal student loan is that the department of education is responsible for the interest for as long as you are a half-time student and also for the first 6 months after graduation.
ii. Direct Unsubsidized Loans
This particular type of loan is made available to graduate and undergraduate students as well as professional students, and it has no regard to any form of financial need. With a direct unsubsidized loan, students are responsible for the payment of the interest on the loan accumulated during the payment period. However, in-school deferment is mostly eligible for students in college or career school. During this period, students are not required to pay the interest on the loan while in school and for up to six months after graduating. However, the interest will accrue during the whole period and then be added to the total balance of the loan. At most times, this in-school deferment is automatically granted to students who qualify for the loan.
iii. Direct PLUS Loans
This type of loans are made available to professional students or graduates and parents of dependent undergraduate students to assist in paying their educational bills that are not settled by other financial aid. The qualification for this loan is not dependent on financial need. Rather, an adequate credit check is what is needed. People with a bad credit history, on the other hand, must meet additional requirements before they can qualify for a loan.
iv. Direct Consolidation Loans
With this type of loan, students are able to accumulate all the federal student loans they are qualified for into one loan with a particular lender.
How To Qualify For A Federal Student Loan
In order to qualify, you first need to apply for a federal student loan. This must be filled out and submitted between the first of October and the thirtieth of June. While for a Direct PLUS loan, you will also be required to fill out and submit the application and sign a promissory note. Most colleges set a particular deadline for submission in order to be eligible for the program. However, to qualify for a federal student loan, some of the necessary requirements include:
- You are required to show financial need.
- To apply, you must be a US citizen.
- Must be accepted or enrolled as a qualified student in an eligible certification program or degree.
- must maintain excellent academic progress throughout the whole school or college year.
- It is required that you have a high school diploma or any other eligible equivalent.
Some additional loan requirements needed in order to qualify for a parent PLUS loan includes;
- The borrower is expected to be either the biological parent or adoptive parent of the undergraduate student.
- The borrower must not have an adverse credit history.
- The borrower must meet the necessary requirements for federal student aid.
Some additional loan requirements needed in order to qualify for a grad PLUS loan include;
- The borrower is expected to be a professional student or graduate at an eligible school in a program that leads to a professional certificate or degree.
- The borrower must not have a bad credit history.
- The borrower must meet the necessary requirements for federal student aid
However, another important thing to note is that there is a limit to the amount you can borrow. For instance, as a first-year undergraduate, you are eligible to borrow only about $5,500, out of which only about $3,500 can be a subsidized loan. And it is also applicable to the total amount that can be borrowed throughout your college year. In cases where you might need to borrow above that limit, you can consider going for a federal direct PLUS loan, as it has a higher limit when compared to the other loan types.
Student loans are part of the necessary resources made available to assist individuals in settling their college bills. There are various pro’s and con’s associated with either federal or private loans. To be eligible for a private loan, you must first pass a credit check. Also, it is important to note that debt settlement is one way of settling private loans. While federal student loans are based on financial need and have low or no interest rates, private student loans do not.