Federal Student Loan – Federal Monetary Assistance for Education

Nelson Mandela has rightly stated ‘Education is the most powerful weapon to change the world.’ Education, with its endless benefits, is an important element of every person’s life. It not only helps in the development of a person as an individual but also helps in the progress of his family, society and the nation. With an increase in the importance of education, the cost associated with it is also increasing. Hence a number of students are opting for monetary assistance like student loans to pursue their college education. There are a variety of student loans available and it is important to opt for a loan that perfectly suits one’s needs. One of the most preferred and economic type of student loans is the federal student loan. These are the loans for education given by the federal government and are provided through the Federal Direct Student Loan Program (FDLP) by U.S. Department of Education. The federal government program for loan to students has been designed to cater to diverse group of students. This loan can be subsidized or unsubsidized. In a subsidized loan, interest on loan is paid by government when the student is completing his education. In an unsubsidized loan, the interest on the loan has to be paid by the borrower. Fixed, low interest rate and no collateral or credit checks make it a favorable option for students. Federal student loans can be further classified as– • Stafford Loans – These loans are available on subsidized and unsubsidized basis for undergraduate as well as graduate students. These loans are not subject to an approval of credit and also offer 6 months deferred repayment period. • Perkins Loans – These fixed interest rate loans have very generous terms and are designed especially for students with acute financial needs. They can be taken by undergraduate or graduate students who qualify in the loan terms. • Parent Loan for Undergraduate Student (PLUS) Loans – These loans are taken by parents for the education of their children. The loan terms are different than other types of federal loans like the interest is comparatively higher, commitment of repayment is done by parents etc. • Consolidation Loans – These loans are for students who have more than one federal student loan to repay. They can consolidate the various loans into a single loan at a fixed interest rate and longer repayment term. The benefits of federal student loans are – • Federal loans offer a grace period (deferred repayment) after the completion of education. • Rate of interest is lower than private loans like for undergraduates it usually ranges in 3.4% to 6.8%, depending on the type of loan. • As rate of interest is fixed, the repayment amount stays same over the loan period and without any ‘surprise’ increases. • Less stringent credit requirements makes most of the students eligible for federal loans. • Federal loans are designed in a way that the borrower is protected even if he runs into a financial trouble. Any parent or student must explore the varied options available under federal student loans before opting for a private loan. A wise, careful and well-thought made choice of loan will save you from being burdened under a mountain of debt to be tackled after the completion of your education. Read More...