What Are Federal Loans?
- Federal loans are a type of loan provided by the U.S. government to eligible students or their parents/guardians to help cover the cost of higher education.
- They are a dependable option for financing education, and paying for college tip.
- After exploring federal loans, private student loans can help if you still need more money to cover college expenses.
Types of Federal Loans
Direct Subsidized Loans
- Direct Subsidized Loans are available only to undergraduate students who have financial need.
- These loans do not accrue interest while the borrower is in school.
- The government pays the interest on the loan for a set period of time.
Direct Unsubsidized Loans
- Direct Unsubsidized Loans are available to both undergraduates and graduate or professional degree students—and you don’t need to show financial need.
- Borrowers do not need to demonstrate financial need, but these loans accrue interest immediately.
- The borrower is responsible for paying the interest on the loan.
Direct PLUS Loans
- Direct PLUS Loans are available to graduate or professional students or parents of dependent undergraduate students.
- These loans carry higher interest rates and higher loan origination fees than Direct Subsidized and Unsubsidized Loans.
- Borrowers must have a good credit history to be eligible for a Direct PLUS Loan.
Federal Loan Basics
- Federal student loans offer a fixed interest rate, which means your monthly payments will be the same for the life of the loan.
- Federal student loans also offer flexible repayment options, such as income-driven repayment plans.
- Federal student loans can be forgiven, canceled, or discharged in certain situations.
Applying for Federal Loans
- Applying for federal student loans is free.
- All you need to do is complete the Free Application for Federal Student Aid (FAFSA).
- In addition to determining eligibility for federal student loans, the FAFSA also determines whether you may qualify for other federal student aid like grants and work-study.
Repaying Federal Loans
- There are different types of repayment options for federal student loans, including fixed repayment plans and income-driven repayment plans.
- Fixed repayment plans determine what your monthly payments will be based on the total amount you owe, what your interest rate is, and the repayment time period.
- Income-driven repayment plans determine what your monthly payments will be based on the size of your family and how much money you make.
Specialized Federal Loans
- The U.S. government offers loans in various areas, including education, housing, business, and agriculture.
- These loan programs aim to encourage innovation, entrepreneurship, employment, and healthy competition.
- Government loans provide funding for specific needs, such as buying a home, financing education, or starting a business.
Avoiding Scams and Pitfalls
- Be cautious of requests for personal information or money to get a grant or loan.
- Learn how to recognize, avoid, and report “free money” scams.
- Protect yourself from government scams on USA.gov.
Additional Resources
- Visit the Federal Student Aid website for more information on federal student loans.
- Contact USA.gov for assistance with government-related questions.
Conclusion
- Federal loans are a reliable option for financing education and other expenses.
- Understanding the different types of federal loans and their benefits can help you make an informed decision about borrowing.
- Always explore federal loan options before considering private loans.