Student Loan Types

Student Loan TypesOne of the best parts of having federal student loan’s, and not private loans, is that there are many different repayment options available to borrowers based on their personal financial situation.

So which repayment plan option will be best for you? First, here is a quick look at the different student loan types on the market today to help you understand more about the types of loans you have.

Stafford Loans

The interest rate on Stafford Loans is lower than most since they are guaranteed by the Federal Government. While enrolled in school, the student does not have to make any payments, and this includes students enrolled in a half-time schedule. Payments are expected to be made, however, six months after the student has no longer become enrolled half-time in school.

There are different types of Stafford Loans that students can apply for, as well:

If a student has shown that financial aid is greatly needed, then the subsidized loan may become an option. While the student is enrolled at least half-time, the interest will be paid through the government. This will also occur during deferment or during the post-college six month grace period.

There is a maximum amount that students can receive while in an undergraduate program, and that is $23,000. The number differs by year, but that is the lifetime total on the subsidized Stafford Loans.

In the case of an unsubsidized loan, the student’s loan will accrue interest while at school. Interest while enrolled can also be deferred, and that interest is added to the original loan amount after graduating.

Since a lot of eligibility is determined by dependency status and your ability to pay for school, independent students who don’t have parents that can help pay will receive more from subsidized loans.

FFEL Loans

FFEL stands for the Federal Family Education Loan. These loans were originated along with regular Stafford Loans during the Higher Education Act of 1965. As of 2008, there were over 6 million students that were using this type of loan.

What made this type of loan different was the fact that it was funded by not only public programs, but also private lenders. However, this program was ended in 2010 during the Health Care and Education Reconciliation Act of 2010, and the program ended in June of that year.

PLUS Loans

PLUS Loans are available to the parents of those that are at least half-time college students. Much like the Stafford Loans, PLUS Loans have the ability to be consolidated and are provided by the federal government.

There are quite a few differences between PLUS Loans and Stafford Loans, though, too. Before July of 2008, PLUS loans required payments to be made while the student was enrolled, but this has since changed to the same schedule as the Stafford Loan.

PLUS Loans have a fixed interest rate and collect interest from the start of the loan. Since the loan is for the parents, themselves, and not the student, it will not affect the student’s credit.

Consolidation Loans

The government has given students the opportunity to consolidate any of the three federal loans into one debt. Throughout the entire consolidation, the interest rate does not change on the loan. To acquire a consolidation for federal loans, there must be one FFEL Loan or Direct Consolidation loan to apply.

Federal Perkins Loans

These loans have an interest rate that does not change at 5 percent over the course of repayment, which is 10 years. Similar to other loans, there is a grace period after no longer being enrolled at least half-time, but it is longer than most at nine months instead of six. Students that apply for the Perkins Loan are eligible to receive a maximum of $60,000 if they attend graduate school, and $27,500 if they do not.

Do you still have questions?

Give us a call today at 1-800-488-1490 to find out more about your specific loan structure, the programs that may be available to you, and how to potentially reduce your monthly payments and possibly have your federal student loan debt forgiven!

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