The US offers two means of obtaining a student loan, one is through the federal government and the other is through private lenders. This article will be discussing the federal loan and its four main programs. To obtain a federal loan you have to fill out a form called the Free Application for Federal Student Aid (FAFSA) and choose any one of the four federal programs.
The four main federal loans are:
- FEDERAL STAFFORD LOAN
- FEDERAL PLUS LOAN
- FEDERAL GRADUATE PLUS LOAN
- FEDERAL CONSOLIDATION LOAN
FEDERAL STAFFORD LOAN:
The Federal Stafford loan is opted by students, who do not want to depend on their parents and have a loan straight on to their names. The loan is backed by the government and there is no credit check, no need for proof of income or assets. It is to be repaid back when the student graduates. Most students as soon as they graduate quickly search for a job and start repaying back the loan.
To get a Stafford loan, you will have to search for institutes that offer this program directly through the federal government. Such schools are called Direct Lending Schools, where as some of them offer the loan program through a bank or other lenders. These schools are known as the Federal Family Education Loan (FFEL).
FEDERAL PLUS LOAN:
Federal Plus is offered in the name of the parent and the process of credit check is compulsory, however, there is no steadfast rule on the credit criteria. The loan has to be repaid once it is entirely expended. The payment could be postponed but interest will still be charged.
FEDERAL GRADUATE PLUS:
This loan follows the same process as that of the PLUS loan, however, the difference here is that the loan is taken out on a graduate or a student who has just become a professional. To get the Graduate Plus loan, the student must go through the Stafford loan and apply for maximum annual limit. The Graduate Plus loan requires that the student repays the loan within 60 days after disbursement of the loan.
FEDERAL LOAN CONSOLIDATION: Federal loan consolidation allows the repayment period to be extended for student or parent borrowers.They can request for a fixed interest rate and accumulate all federal student loans into one single federal loan consolidation loan. This process works similarly like debt consolidation. The only disadvantage to this process is that there will be an increase in interest as the more the time period is extended, the more interest gets stretched out.
