The cost of education keeps increasing every year. More and more students are now finding themselves in situations where they have to struggle financially to pay for their higher education as well as sustain themselves in college. There are many expenses involved in universities such as tuition, books, accommodation and many other fees. In the current economic situation, many parents are unable to fully fund their children’s education hence necessitating college subsidies and loans.
Part-time jobs are not adequate to pay for all fees and support students simultaneously. Therefore, the only viable solution to this problem is to seek federa student loans. These are subsidized loans offered by the government with the aim of assisting students to complete their education and also have some relative comfort while living on campus. This article, therefore, acts as a guide to student loans that assist prospective college students with all the vital information that will help them to make the correct decision while borrowing.
The Main Types of Federal Student Loans
There are three types of fedeal student loans that a student can apply. These are direct unsubsidized loans, direct subsidized loans, and direct PLUS loans. The direct federal student loans program administers and oversees all these loans. Usually, United States federal student loans considerably differ from private loans regarding benefits and repayment programs. Therefore, as a student, it is important to enhance your understanding of the system before you borrow.
- Direct Subsidized Loans
This is the financial assistance a student receives upon demonstrating a financial need. The criteria for awarding aid is based on the federal regulations. For this reason, the federal direct loan program must evaluate a student’s application based on set criteria before giving financial assistance.
Direct subsidized loans do not carry any interest charged on the student while he or she is still in college. This condition also applies when the student defers their education.
After students complete their college education, they are usually given a grace period of six months whereby the government will charge no interest on the loans. This waiver is meant to give students time to seek employment or a source of income that will enable them to repay their loans. After this period, all students are expected to make interest as well as principal payments.
- Direct Unsubsidized Loans
These loans do not consider the financial need of the student. Any student can borrow regardless of their financial status. However, it is the college that determines the loan amount a student can receive. The money you get as a student will depend on the full fees you are supposed to pay as well as any other financial assistance you receive from other sources.
The interest on the loan also gets capitalized during your entire stay at college. This includes the times you deferred your semesters and the grace period when you are still looking for employment. Direct unsubsidized loans generally increase the total cost of the federal loan. Nevertheless, when compared to private loans, unsubsidized loans still have a lower interest rate. However, if a student does not settle the loan early enough, the interests can accumulate to relatively high levels.
- Direct PLUS Loans
Direct PLUS loan is also unsubsidized financial assistance granted to college students. Similarly, it is a federal loan based on credit. It is usually given to parents who have dependent children in college or to professional/graduate students. The assistance aims to cater for educational costs including attendance fees upon the depletion of funds from other financial aid sources. Direct PLUS loans accrue interest during all periods, i.e., semesters, grace period and deferment. This type of financial assistance also increases the overall cost of the student loan. If a student or parents do not handle the payment procedure carefully leading to delays, the interests might increase to levels difficult to manage.
The Merits and Demerits of Federalstudent Loans
The table below lists the general advantages and disadvantages of federal loans.
How Can a Student Apply for A Federal Loan?
Applying for a government loan is considerably easy as the process is simple and straightforward. What more, it is free to apply. Below is a simple loans guide to assist in your application:
- Complete the Application for Federal Student Aid (FAFSA) form then proceed to submit it.
- FAFSA will then determine if you are eligible for extra assistance like work-study and grants.
- After that, the government sends you a Student Aid Report (SAR) which details the basic information on your qualification for assistance.
- The colleges you selected in the FAFSA will also receive the same information and use it in the determination of the possible federal grants, work-study, and loans you might get.
- The colleges that accept your application will then send you a Financial Aid Reward (FAR) letter. It details all the financial assistance you qualified for.
- After receiving your first loan, you will be required to submit a FAFSA annually to receive funds during your entire stay in college continually.
Renowned Federal Studen Loans Programs in the US
One might ask, “Who offers federal student loans?” The government offers different federal student loans through specific programs and agencies. The following are two legitimate programs that can assist you with financial needs at the university.
- William D Ford consolidation student loans;
- Teacher Education Assistance for College and Hager Education grant, also abbreviated as TEACH.
How Can I Determine Whether My College Has a Federal Assistance Program?
To determine if your institution offers federal students loans or if you so wish to participate in the program, you can utilize the college search tool to find out more information. The National Center Education Statistics hosts this service.