Government Student Loans
Many students rely on federal government student loans to finance their education. These loans generally have low interest rates and some do not even require credit checks or collateral. Government loans also provide a variety of deferment options and extended repayment terms.
In terms of available loan programs, the following information provides a background on government loans as well as an overview of additional programs that are offered by the Student Loan Network.
What are Government Student Loans?
These loans supply financial help for students enrolled at a school that participates in federal aid programs. When referring to a "school," this means a two-year or four-year public or private college, university, or trade school. The Federal Direct Student Loan Program (FDLP) originates and maintains all government student loans created after June 30, 2009. If you received a federal loan prior to July 1, 2010, it may be a result of the Federal Family Education Loan Program (FFELP) and require direct loan consolidation.
What is a Stafford Loan?
Stafford Loans are federal student loans made directly available to college and university students and are used to supplement personal and family resources, scholarships, grants, and work-study. They may be subsidized by the U.S. Government or may be unsubsidized, depending on the student's financial need.
A subsidized federal loan is when the government pays the loan's interest while you're in school while an unsubsidized government student loan requires you to pay all the interest, although you can have the payments deferred until after graduation. To receive a subsidized Stafford Loan, you must be able to demonstrate financial need. About 2/3 of subsidized Stafford Loans are awarded to students with family adjusted gross income (AGI) of under $50,000, 1/4 to students with family AGI of $50,000 to $100,000, and a little less than 10% to students with family AGI over $100,000.
The limit for the academic year beginning in 2010 is $3,500 per year for freshman undergraduate students, $4,500 for sophomore undergrads, and $5,500 per year for junior, senior and 5th year undergrads. Dependent students may also be eligible to receive an additional $2,000 per year in a unsubsidized Stafford loan. Government student loans for graduate students have higher limits: $8,500 for subsidized Stafford and $12,500 per year for the unsubsidized Stafford. Many students also take advantage of the Perkins Loan. For graduate students, the limit for Perkins Loans is $6,000 per year.
Stafford and Other Federal Loans Listed Below
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Parent PLUS Loan
The Parent PLUS Loan is offered to parents of students enrolled at least half time in a program included within a set list of participating post-secondary institutions. PLUS Loans are also available for graduate and professional students. This type of government student loan differs from Stafford and Perkins Loans because it can cover a larger amount of the education's costs, has a higher interest rate and the commitment is undertaken by the parent, instead of the student.
Graduate PLUS Loan
This Graduate PLUS Loan is similar to the Parent PLUS Loan as it is an unsubsidized federally guaranteed loan up to the cost of education.This loan is taken out by the graduate student using their own signature and credit rating. It has the same federal loan deferment and forbearance options as the Stafford Loan, so graduate and professional students can postpone repaying their government student loans while enrolled at least half-time in a degree or certificate program.
Federal Student Loan Consolidation
If a student has a series of loans, through the Stafford, PLUS or Perkins programs, they have the option to consolidate government student loans into one single payment. This results in reduced monthly repayments and a longer term for the loan. The term of the loan can be between 10-30 years. Although the monthly repayments are lower, the total amount paid over the term of the loan is higher than would be paid with other loans.
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