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The Complete Guide to Federal Student Loans

Written by Shreya Berry

Shreya has expertise in writing engaging content for the readers and has a deep interest in unique applications of technology in various domains. She has worked closely on projects with Neil Patel Digital, Hindustan Times, News 18 and Shiksha.

November 19, 2020

The overall tuition and fee rates at four-year public institutions are nearly three times higher than they were 30 years ago. While students’ borrowing is on the decline, many still rely on student loans to pay for education. You may either take out private loans from a broker or bank or government loans from the U.S. to finance your education. Education Department. Federal student loans are often compared to private student loans because they come with lower interest rates, federal safeguards, and debt repayment options.

To help you know how federal loans operate, we have gathered this comprehensive guide to federal student loans, in which we will cover all the available forms of federal student loans, along with your options for repayment and other facts.

Types of Federal Student Loans Processing

The U.S. Department of Education grants many different types of student loans funded by the federal government. To see whether they qualify, borrowers wishing to obtain any of these loans require to fill out the Free Application for Federal Student Aid (FAFSA).

Direct subsidized loans: Undergraduate students with monetary needs may be eligible for direct subsidized loans. The Department of Education pays interest on these loans if you are in school for at least half the time, even after leaving school for a six-month grace period. There are credit caps for direct loans, and your school decides the amount you will borrow.

Direct unsubsidized loans: To obtain direct unsubsidized loans, undergraduate and graduate students may not need to show financial need. These loans also come with credit limits and, depending on the rest of the financial assistance program and the cost of attendance, the school can decide how much you will borrow. You are liable for paying all interest on unsubsidized loans that accrue. When you can not make interest payments when you are in school or during the probation period, the principal balance is added to the interest accumulated.

Direct PLUS loans: Graduate or professional students or parents of undergraduate students are entitled to qualify for PLUS grad or PLUS parent loans. PLUS loans require a background check, unlike subsidized and unsubsidized loans. These loans are open for borrowers without an unfavorable credit history, meaning you may not have defaulted, fallen through collections, had a mortgage, or other conditions in the last few years.

Federal Family Education Loan Program: The FEFL program ceased loan origination after June 30, 2010, but permitted private lenders to make education loans backed by the federal government. Subsidized Federal Stafford Loans, Unsubsidized Federal Stafford Loans, FFEL PLUS Loans, and FFEL consolidation loans have been included in the scheme.

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Direct consolidation loans: Borrowers with existing federal loans can qualify for a direct consolidation loan. It is free to consolidate into a direct conversion loan, which helps you ease your debt by joining your debts into a single payment every month. Eligible for direct consolidation are all the federal loans mentioned above, along with:

  • Supplemental loans for students
  • Federal Perkins loans
  • Federal Insured Student loans
  • Guaranteed Student loans
  • Nursing student loans
  • Nurse Faculty loans
  • Parent Loans for Undergraduate Students
  • Auxiliary Loans to Assist Students
  • Health Education Assistance loans
  • Health Professions Student loans
  • Loans for Disadvantaged Students
  • National Direct Student loans
  • National Defense Student loans

Students cannot have consolidated loans taken out in their parents’ names into loans in their own name. You do not merge any private loans with direct restructuring alone, so when determining how long you need to repay your consolidation loan, the balance on your private loans would be taken into account.

How to Apply for Federal Loans?

To register for federal student loans, there are some necessary moves. Here’s a quick summary of how to apply for federal student loans:

Gather financial information for the family: If you are a dependent undergraduate student, begin by collecting your financial documents and information from your parents.

Complete the FAFSA and review your SAR: Fill out the FAFSA online. You will get a Student Assistance Survey (SAR) within two weeks of completing it, which outlines your eligibility for financial aid.

Check the financial assistance award: You will get a letter from your school that describes the financial aid for which you apply. Contact the financial assistance office of your school if you have any concerns.

Sign and acknowledge your federal student loans: You can sign and accept your federal student loans after you have checked it and appreciate your financial assistance plan. For admission and disbursement, you might need to work with your university’s office of financial assistance.

Need some loan assistance? UniCreds is here to help!

Thanks for reading this blog on The Complete Guide To Federal Student Loans. If you are interested in learning more about student finances, the following may be of interest to you:

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