subject: The Real Truth About Federal Loans [print this page] Federal loans are common education loans among students for the reason that they are presented by the government at low rates and allow to cover all tuition costs and payments. Federal loans are presented through Direct Loan Program.
It's essential to remark that before July 2010 there was also FELP (Family Education Loan Program). The core principle of this loan program is that loans were presented by banks or other financial institutions using the federal funding.
Nowadays this loan education program is unavailable and was eliminated by the government. Today all federal loans are given directly from the government. Private student lenders have no role in the offering loans for students.
Education loans from the federal government are designed for different categories of borrowers. The loans are presented in quite a lot of forms: PLUS, Perkins and Stafford. They all are similar but have distinctions.
A Perkins loans is a low-income loan designed particularly for needy students. Student who have need can qualify for these loans. Families of such students just don't have high income and could not pay for school themselves. In this case college students can qualify for a Perkins loans and repay it later after graduation. The major turning point a borrower can face is that the loan amount is limited. The applying for these loans is simple - the first step is to submit Free Application for Federal Student Aid. The most general method is submitting the form using the Internet.
A Stafford loan is the most popular loan type. Millions of college students really receive funding because qualify. Stafford loans are coming in two types: Subsidized and unsubsidized.
Students who demonstrate financial need can qualify for subsidized Stafford loans. This type of loan is similar with Perkins loans. The divergence is that Perkins loans are for college students with exceptional financial need. But the term subsidized the government means that it pays the interest for a borrower. Subsequently, a borrower owes only the core sum he must pay back. In other words, there is no interest paying involved.
Unsubsidized Stafford loans are presented for student not considering financial need and nearly every one students qualify. Nevertheless the government does not subsidize this loan by paying the interest. In this case, a student has to pay the loan plus the interest that can accrue.
PLUS loans are low-income loans offered for both graduate college students and parents of dependent students. PLUS loans are credit-based loans like loans offered by private lenders. It's necessary to have good credit score. This type of federal student aid is dealing with credit-based criteria. It means that a borrower must have high-quality credit history or a credit worthy cosigner. A student could not qualify if he doesn't meet requirements. This category of federal loans is not cared about financial need of borrowers. It doesn't if a borrower has low-income or financial troubles. Only a borrower is responsible for it. Subsequently, a number of risk involved.
In the end it's necessary to point out that there are core types of federal financial aid: Stafford, Perkins and PLUS loans. The important move is to be on familiar terms with all details about each one for the reason that it has strong and weak sides to take into consideration.
