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Federal Student Loans
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Article on Federal Student Loans
College is expensive; there is no doubt about it. Not many students have the means to pay for their education without some type of financial aid, and this is usually in the form of grants or federal student loans.
About Federal Loans
The U.S. government backs all federal student loans and these loans are available through the college, or from lenders of student financial aid. The Federal Family Education Loan Program or FFELP is the first step in obtaining any student loan. These federal loans are much easier to get because the credit requirements are not as strict as those from a private lender. They also offer a lower rate of interest, several options for repayment and a longer time frame in which to repay. The Free Application for Federal Student Aid form must be filled out and submitted in order to receive this aid.
The Stafford Loan
Anyone can apply for the Stafford Loan, which is why this is the most popular federal student loan source, and demonstrating financial need is not a requirement. The loans are either subsidized, or unsubsidized, and the rate of interest is fixed for the duration of the loan. With a subsidized loan, the government pays the interest as long as the student is attending school. On the unsubsidized student loan, the interest is paid by the student, who may elect to wait until he or she graduates before making a payment. The Stafford Loan does require that the student be enrolled in college for half time.
The Perkins Loan
Interest rates on this federal student loan are very low to graduate or undergraduate students. A fixed 5% rate is offered to any student who is able to prove financial need. The undergraduate student who demonstrates need is allowed to borrow up to approximately $4000. A graduate student with financial need is allowed to borrow up to $6000. The Perkins Loan differs from all other federal student loans in that the student is not required to attend school for at least half time.
Other Federal Loans
The Plus loan, or the Parent Loan for Undergraduate Students, enables the parents of undergraduate students who are their dependents to apply for financing. Applicants for the Plus loan must have a credit rating in good standing with no adverse reports. The parents are able to borrow whatever funding the student needs minus any other aid they have received. The payment begins while the student is attending school, and the interest rate is slightly higher than other federal student loans.
There are private lenders who offer financing for college students, but it is best to investigate any and all federal student loans before resorting to private sources. There are a few good points to consider with private loans in that the education can be funded at 100%, there is no FAFSA to fill out, and the funds can be used for many things. On the downside, the interest rate is higher and it is also variable and subject to change, unlike federal student loans that offer a low, fixed rate.
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