What You Need To Know About Federal Student Loans
No matter where your future takes you – to a university, trade school, or community college — you need to figure out how to pay for your college education. The costs of attending college may seem overwhelming, but they are not, if you spend a little time in advance gathering the necessary information. A good place to start is to learn about your Federal Student Loan options. Each year, the federal government provides low-interest loans to millions of students just like you. Here is what you need to know to become one of those selected.There are many different types of student loans available, both through the Federal Family Education Loan Program (FFELP) and through the Federal Direct Student Loan Program (FDSLP). FFELP loans come from private-lending institutions, such as banks, credit unions, and savings and loan institutions, while FDSLP loans are provided directly by the U.S. government and distributed to students through participating schools.
The Federal Stafford Loan is the largest loan category to help college students pay for their college education. Subsidized Federal Stafford Loans are available to students who have financial needs. This means that the loan interest will be paid by the government or educational institution that student attends, during the course of the student’s education. Also, unsubsidized Federal Stafford Loans are available, regardless of financial need. The borrower is responsible for interest accrued on unsubsidized loans for the life of the loan. You must be enrolled at least half-time as a student to be eligible for either type of Federal Stafford Loan.
Parent Loans for Undergraduate Students (PLUS) are federally insured loans for parents who need to borrow money to pay for the education of their dependent children. The total amount borrowed can be equal to the total cost of a child’s undergraduate education; minus any financial aid that child receives from other sources. In 2006, Federal PLUS loans were expanded to be available for graduates and professional students as well.
Federal Consolidated Loans allow borrowers to consolidate all of their federal school loans into one single loan with one monthly payment. A Federal Consolidated Loan results in a low, fixed-rate loan and is generally weighted to reflect the average of the existing loan interest rates. Depending on the total loan balance, this option also might allow a borrower to extend the total loan repayment period.
The Federal Perkins Loan is strictly a need-based loan. Qualification is determined by criteria set by the federal government, and funds are subsidized by the school the student attends. Therefore, students may qualify for a Federal Perkins Loan, but those funds will not be available to the student at every institution. Approximately 1,800 universities and colleges participate in the Federal Perkins Loan program. These schools maintain the flexibility of awarding those funds as they see fit to the students attending their school.
Pros and Cons of Federal Perkins Loans
In order to apply for a Federal Perkins Loan or a Federal Stafford Loan, you must complete the FAFSA. A separate loan application is not required. However, you will need to sign a Promissory Note, which is a binding legal contract that says you agree to repay your loan according to the terms of the Promissory Note.
Read this note carefully before signing it, in order to understand the terms and conditions of your loan. Check carefully that you understand the following:
Keep a copy of this note for your records.
You may find that you qualify for one or more types of Federal Student Loans. So, make certain that you understand the terms and conditions of each, in order to make the best choice for your college education and your future after you complete college.
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