Federal Student Loans
Federal student options are funded by the federal government which are meant to help students finance their education.
Whether it be for tuition, books, food, room, and board, or other costs, these are a lifesaver for many students around the country.
Additionally, these generally offer low-interest rates, fees, and a lot of options for repayment. As a result, these are often preferable to private student options for students looking for more flexibility.
There are four types available, all of which are part of the William D. Ford Federal Direct Loan Program, also known as Stafford loans.
These four types include:
1. Direct Subsidized: Direct subsidized are intended for undergraduate students who demonstrate financial need. Interest on these doesn’t accrue while you’re still in school.
2. Direct Unsubsidized: Undergraduate, graduate, and professional degree students can borrow unsubsidized options each year to pay for school. Unlike subsidized, these do accrue interest while you are in school.
3. Direct PLUS: These are designed for parents who are paying for their children’s undergraduate education, or for students enrolled in a graduate or professional degree program. These can be used to pay for your school’s total cost of attendance.
4. Direct Consolidation: Lastly, direct consolidation options are used to consolidate all of your federal debt into one balance with one monthly payment.
Together, these four federal options are designed to provide funding to any college student in need of financial assistance at lower costs than private student options.
Federal student loans are a great option for students in need of aid as they offer certain perks that make it easier to manage your student debt.
These benefits include:
- Deferment and Forbearance: Deferment and forbearance allow borrowers who experience financial hardship to pause their payments without penalty. This can be used to buy a little bit of time while you recover from your financial hardship.
- Variety of Repayment Plans: Federal student loans offer income-driven repayment plans to accommodate borrowers who can’t make the minimum monthly payments on their balances. These payment plans make it much easier for low-income individuals to manage their debt.
- Loan Forgiveness: Graduate students with federal student loan debt may have their debt forgiven if they work in public service, for a non-profit, are a teacher or meet any other forgiveness qualifications.
Moreover, they typically offer low-interest rates and fees, making them cost less than other student financing options.
How Much Do They Cost?
The total cost is determined by four main factors: balances, interest rate, term, and fees.
The interest rates and fees for the 2019/2020 school year are as follows:
|Direct Unsubsidized||Undergraduate: 4.53%, Graduate: 6.08%||1.06%|
Direct subsidized are available in amounts up to $5,500 per year, while unsubsidized go up to $20,500 per year. Limits for Direct PLUS are dependent on your school’s certified total cost of attendance. Your term will depend on your repayment.
How to Apply
To get a student loan, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA).
Schools and states use this application to determine your eligibility. You have to fill out this application every year to remain eligible for federal student aid.
It’s important to fill out this application as early as possible as there is a limited amount of funds for certain types of aid.
After filling out this application, you will receive an award letter that tells you what type of aid and how much money you are eligible to receive.
You can either accept all, some, or none of your award. You will typically be given a deadline by which you need to respond in order to receive your financial aid.
Once you accept your award, your school will give you information related to disbursement and let you know if you need to provide any additional information before receiving your federal student aid.
Monthly payments at 4.53% interest rate on a 10 year loan with a $22,000 balance, excluding origination fees of 4.25% for direct plus loans and 1.025% for direct loans