Private Student Loans
Federal Student Loans
Federal student loans summary:
The federal government offers student loans through colleges and hires loan servicers to handle support for repaying the funds.
Federal student loans offer many benefits and ways to get an affordable payment.
It’s difficult to get rid of federal student loans through bankruptcy or debt settlement, but it could happen.
Federal Student Loans Definition and Meaning
Federal student loans are a type of financial aid that the federal government offers to college students or their parents through their school’s financial aid process.
Borrowers must repay their federal student loans. But the federal government makes it a bit easier for those who qualify, especially if you’re facing a financial need. The government may pay the interest on your loans while you’re in school, for example, or offer affordable income-driven repayment plans when you start repaying your debt.
Key Features of Federal Student Loans
Federal student loans offer several features that borrowers should know about.
Application
Students for a federal student loan by filling out the Free Application for Federal Student Aid (FAFSA). Your college will use the results to calculate your eligibility for federal student loans.
Eligibility
Undergraduate and graduate college students may be eligible for different types of federal student loans depending on their financial situation. Parents may also apply for federal student loans to pay for their child’s education, but they are responsible for repaying those loans.
Term length
By default, borrowers repay federal student loans over a 10-year term. Some payment plans may extend this up to 25 years.
Requirements
Student loan recipients must be a college student, or paying for their child’s college education. There are no minimum credit score or income requirements, and a co-borrower isn't required. Loans for parents and grad students may require a credit check.
Interest rate
Each federal student loan has its own pre-set fixed interest rate, meaning that your rate won’t change over time once you have the loan. The rates could change for new loans.
Loan limit
The government sets caps on how much you can borrow in federal student loans each year—and in total—depending on the type of loan you’re taking out, your year in school, and whether your parents are still supporting you or not.
Payment flexibility
The main way borrowers get payment relief for federal student loans is through income-driven repayment plans, which can lower your payments to $0 if you qualify. You might also be eligible for forbearance or deferment if you only need temporary help, or student loan forgiveness through certain programs.
Debt relief options
It’s not easy to get rid of federal student loans through bankruptcy or debt settlement unless you meet tough criteria, like becoming permanently disabled.
Types of Federal Student Loans
Federal student loans have changed over time and some are no longer offered today. Most college students have access to the following types of federal student loans:
Subsidized: Eligible undergraduates can qualify to have the interest paid on their loans while they’re still in school.
Unsubsidized: Undergraduates, graduates, and professional students are eligible for these loans. Interest is added to the loan balance while they’re still in school.
Consolidation loans: Anyone with federal student loans can combine them to make repayment easier, and to qualify for certain repayment options.
PLUS loans for parents: Parents can take out extra student loans for their children, but the parents will be the ones responsible for repaying the loan.
PLUS loans for students: Graduate and professional students who need to borrow a bit extra for school may qualify for these loans.
Federal Student Loans FAQs
Are there fees for federal student loans?
Yes. In addition to interest, there's a fee for federal student loans. The fee depends on what year you received your first federal student loan.
Why are federal student loans better than private student loans?
Federal student loans typically have lower interest rates and easier approval standards than private student loans. They also have more flexible repayment terms, including special programs for borrowers having trouble making their payments.
One disadvantage is that there are dollar limits on federal student loans that may be too low to meet your needs.
Is debt refinancing a good idea for student loans?
Sometimes, but there may be problems. It can be hard to lower the interest rate on a federal student loan because they are already relatively low. Also, if you pay off a federal loan with a private loan, you would give up access to special programs and protections for federal student loan borrowers. In some cases, debt consolidation or refinancing can lengthen the time to repay your loan. That may result in you paying more interest.
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