Student loans have long been a popular form of financial assistance utilized to help students to access post-secondary education. Student loan debt at the present time is estimated to be ~$1.2 trillion dollars in 2021 alone. Student loans also come in many forms. Some are guaranteed loans, others are not. They are also categorized according to types. There are many subtypes of student loans.
Federal Student Loan: Federal loans are one of the most common subtypes of student debt and are offered through government programs. They offer standardized payment plans and interest rates. They also provide extended repayment plan for the borrower that range from ten to forty years with no penalties. The Federal Perkins Loan program offers a five-year subpartition for parents with children attending college. In addition, there is the Federal PLUS loan program for parents who have at least one child going to college. Both of these subprograms have very similar features.
Subsidized Stafford Loan: Subsidized Stafford Loan programs have varying conditions depending on the type of unsubsidized loan. For example, the Stafford loan is a Direct Loan, which pays the loan back at the beginning of the grace period after graduation or upon graduation. This loan is also based on an inflation index that differs each year. A portion of the interest on subsidized Stafford Loans is given to the lender as a loan-interest refund.
Graduate Students: The graduate programs offered by the U.S. Department of Education contain both federal and private loans. The federal programs are more diverse and offer more choices for the graduate student. Graduates will be eligible for subsidized and unsubsidized loans depending on their FAFSA application status. At this time there are very limited private loans available for graduate students.
Direct Loans: All graduate students may qualify for a Direct Loan. These types of loans do not need to be repaid and do not need to be re-paid. Direct loans are often the preferred choice of many graduate students. Some graduate students use PLUS loans, which stand for Plus Option for Financial Aid.
Private Student Loans: The private student loans vary greatly in variety and prices. The federal loan program does not apply to graduate students. The selection criteria for the private student loans require that the student be a full time student at an accredited college or university. The payment terms range from six months to three years. The most common loan types are the Perkins, FFEL, and Stafford loans.
Undergraduate Students: The federal loan program does not apply to undergraduate students. The selection criterion requires that the student be enrolled in an undergraduate program at a school that participates in the federal loan program. The payment terms and rates range from six-month grace period to six-year repayment option. Some schools have a subsidized loan facility that covers all the costs of tuition and books. The other schools participate in a service or student loan program that pays the cost of tuition and books.
Graduate Students: The Graduate student loan debt consolidation is similar to the undergraduate loan consolidation. The federal program does not require repayment. The eligibility requirements for the graduate student loan debt consolidation are almost identical to the requirements for the undergraduate loan consolidation.
The interest rates on the graduate loan debt consolidation loans are lower than those on the undergraduate loans. The only exception is that the total loan amount is higher when the federal loans are combined with the graduate Stafford loans. The repayment schedule is generally five years and the repayment begins after graduation. Unlike the graduate Stafford loan, the federal loans do not have any grace periods during which the payments are suspended. There are also specific laws that govern the repaying of the consolidated federal loans.
To borrow federal student loans, you will need to fill out the Free Application for Federal Student Aid (FAFSA). There is also an application for federal student loans that you can use to borrow money. However, you cannot borrow money under these programs if you have already borrowed money from banks or your school has used a private loan to pay for your tuition. You can still borrow money under these programs if you have enough federal funding. If you have used funds from your parents, you may also have access to federal student loans.
Private loans may be easier to get, but they come with higher interest rates. There is a waiting period during which time the borrower can borrow the money and interest rates are much higher than the federally funded student loans. Therefore, many students opt to go with the federal loans because they offer better rates. It may be necessary to work at getting a subsidized loan if the borrower does not qualify for the government loan.
