Student Loans

A lot of students are relying on federal government loans to pay for their college tuition, books, and living expenses. A student loan is designed to help the students to finance their education. These student loans have lower interest rates and do not require credit checks or pledge of specific property to a lender to secure repayment of a loan. A variety of deferment options and extended terms of repayment are being provided by student loans.

To help college students pay for their education, the United States uses a federally guaranteed student loan program. This program will allow students to borrow money at lower interest rate and will defer payment until they are graduated or no longer in school. A student loan is generally offered as part of a total financial aid package that may include grants, scholarships or work study opportunities. In the United States, there are three types of student loans. Two types of the student loans are sponsored by the federal government and the other type is private loans.

Student loans include the Federal Stafford and the Federal Perkins Loans. For students, the main federal loan is called the Stafford Loan and this loan has two variations, Federal Family Education Loan Program (FFELP) and Federal Direct Student Loan Program (FDSLP).

Federal Family Education Loan Program (FFELP) loans are provided by private lenders, such as credit unions, savings & loan associations and banks. These loans are guaranteed against default by the federal government.

Federal Direct Student Loan Program (FDSLP) loans or “Direct Loans”, administered by “Direct Lending Schools”, are provided by the United States government directly to students and their parents.

Stafford Loans are either subsidized or unsubsidized. On subsidized loans, the government pays the interest while the students are still in school. On unsubsidized loans, the students will pay all the interest even though the students can have the payments deferred until after graduation.

In able to receive a subsidized Stafford Loan, a student must be able to demonstrate financial need. Most of the Subsidized Stafford loans are awarded to students with family AGI up to $100,000, and less than 10% of the Subsidized Stafford loans are awarded to students with family AGI over than $100,000.

Students can defer the payments until after graduation by capitalizing the interest with the unsubsidized Stafford loan. This will add the interest payments to the loan balance, increases the size and cost of the loan. All students are eligible for the unsubsidized Stafford Loan.

The repayment of the Stafford loans begins six months after the student graduates or drops below half-time enrollment. The standard term of repayment is 10 years, although a student can get access to alternate repayment terms by consolidating the loans.