There are two types of Federal Student Loan programs, one the Direct Federal Loan Program and the other Federal Family Education Loan Program. Both of them are key components of successful college financial aid strategy.
Federal Student loans should have to be a very first step they take in the financial aid process:
- U.S. Department of Education administrates the Direct Federal Loan Program and also acts as lender for the Program.
- The Federal Family Education Loan Program (FFELP) consists of the Stafford Loan, PLUS Loans and Federal Consolidation Loan. This program allows federal loans to be availed through private lenders such as Sallie Mae and Nelnet. Because of private lenders more student gets access to federal loans.
Federal Students Loans are guaranteed by the government that mean if you default on any loan repayment then the government will back the lender financially for the loss.
Best thing about federal loans is that they are affordable and almost everyone qualifies for some aid.
Here are some advantages of the Federal Student loans that make it apart from private loans and other loan types.
Federal Loan Interest Rates
As federal loans are funded by the government that’s why interest rates are significantly lower than private student loans. Through FFELP program private lenders can offer the federal student loans, but in that program government regulate the interest rates and other features to ensure that borrowers are treated fairly and consistently.
Flexible Repayment Plans
The best thing about Federal Student Loans is that they do not come due for repayment until six months after you graduate of leave college while for private student loans its not like that.
This six months grace period allows you to get on your feet financially before repayment commences. How much you will payback and for how long that depends on repayment plan, which you will choose after being approved for the loan. Payment plans are in standard, graduated, extended, and income contingent types.
While Parent PLUS loans are due for repayment as soon as the loans are fully disbursed.
How To Apply for Federal Loans
FAFSA is the key to securing a federal loan for your college career. You will fill out the FAFSA before the federal as well as your state’s deadline. After filing FAFSA you automatically qualifies for all federal loans and grants depending upon the financial information you provide. Almost every student qualifies for Stafford Loan aid, subsidized or unsubsidized.
What will happen after filing FAFSA?
Student Aid Report (SAR) is the follow up to the FAFSA. The government generates this report from your FAFSA and that report copy is sent to all colleges where you had applied. Based on that report they are in position to offer you an aid package (award letter) keeping in view your financial situation.
When you get your award letter from the college then your next step will be to choose a financial aid lender. In past colleges and universities provide Preferred Lender Lists but now you ate free to choose your own lender for your federal loans.
Federal Student Loans are Binding and Real
If you are thinking that student loans are not a big deal or somehow less serious then you are mistaken. It’s necessary that you take these loans seriously, apart from that you will start paying back that after years. Your financial future depends upon your diligence with repayment and all loan terms.
Always give priority to federal student loans before you use any other.
