Federal Student Loans | Federal Stafford Loans | Federal Student Financial Aid

By : Andrew Shultz    99 or more times read
Submitted 2009-12-23 11:21:39
Federal student loans offer a viable option to pay for college education. Federal programs are the single largest source of college loans. In order to obtain most federal student loans, you will first need to file the Free Application for Federal Student Aid (FAFSA).

Student loans available under federal programs have very attractive terms when compared to most borrowing options such as private student loans. Interest rates on Federal Student Loans are lowsince they are set by the government. These loans also offer very flexible repayment terms with additional options such as ability to postpone making payments, longer repayment terms, and less stringent credit requirements.

In most instances, FAFSA is required for all federal financial aid including federal student loans. Federal loans are great because they are not driven by sheer profit like private lenders. In order to take full advantage of federal student loan programs, you must be familiar with federal loan programs.

Federal Student Loan Programs:
In summary, There are four main federal loan programs:

  • Federal Stafford Loan
  • Federal PLUS Loan
  • Federal Graduate PLUS Loan
  • Federal Consolidation Loan


Federal Stafford Loans:
The Federal Stafford loan is made in the name of the student, is based on needs (only the subsidized portion), does not require any credit check. Federal Stafford loan is not due until after the student graduates, leaves school or stops attending on at least a half-time basis. Some schools offer Stafford loan directly through the federal government. These are commonly known as Direct Stafford Loans. The schools that offer Direct Loans are known as Direct Lending Schools. Other schools offer Stafford loans through banks or other lenders. These schools are commonly called FFEL schools (Federal Family Education Loan). In order to obtain a federal Stafford loan through a FFEL school, you will need to choose a lender.

Federal PLUS Loans:
Federal PLUS loans are made in the name of a parent. While they do require a credit check, the credit criteria to obtain a PLUS are not as stringent as they are for other types of consumer loans, for example auto or mortgage loans. Repayment of a PLUS loan begins after the loan is fully disbursed. Again, some schools offer PLUS through the federal government and others offer it through banks or other lenders.

Federal Graduate PLUS Loans:
The Federal Graduate PLUS is just like the PLUS for parents except that it is made in the name of a graduate student. However, you must first use your Federal Stafford loan eligibility before applying for a Federal Graduate PLUS loan. It is important to remember that the Federal Graduate PLUS requires payment as soon as the loan is fully disbursed. Deferment options are available while you are still attending school at least half-time. Check with your financial aid office. (Note: Services are automatically placing Grad PLUS loans in deferment).

Federal Loan Consolidation
Federal loan consolidation is for students who are in repayment status or parents who wish to extend the repayment period on their current PLUS and obtain a fixed interest rate for the life of the loan. You can combine all of your eligible federal student loans into one loan with a Federal Consolidation Loan. Consolidating also locks the interest rate you pay on your loan. One of the most important benefit of consolidating student loans is the interest rate lock that allows you to pay a fixed interest rate on all of your loans.

If federal loans are not enough to cover your educational expenses, if you do not wish to make payments of principal and interest while in school or if you want a loan that is in the student's name, there are private student loans that are made by banks and other lenders. They must be used solely for education expenses, but offer convenience and flexibility not found in other federal loan programs. However, you will need good credit and most students will need a qualified co-signer in order to obtain a private loan. Also, while interest rates, fees and other loan program terms are competitive, they vary widely from lender to lender. It is important to compare your options before choosing a private loan. One of the drawback of private loans is that interest rate of them is dictated by the credit rating of the co-signer. Also, co-signer will be help responsible for the repayment if student defaults at any time. Private loans are unsecured, credit-based loans available to students for tuition and fees, room and board, school supplies, computers and other every education related expenses.


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