Student Loans Guidebook

Types of Federal Student Loans

January 25th, 2010

When you opt to apply for a federal student loan and not a private student loan, you might be interested that it offers low interest rates, longer repayment period and many more. You are not even required to pay for any interest as the government will pay for it when you are a recipient of federal subsidized student loan. Before you apply for a federal student loan however, you need to discuss thoroughly with your parents and financial advisers about the type of federal student loan that will suit you the best. There are three types of federal student loans:

1. Stafford Loan
Stafford loan offers fixed interest rates in two types of loans: subsidized federal student loan and unsubsidized federal student loan. In subsidized federal student loan, the government will pay the interest during the studies. In unsubsidized federal student loan, the student has to pay for the interest but he has the option to postpone the payment until graduation. This is the most common type of federal student loan that can be applied by anyone.

2. PLUS Loan
PLUS loan or Parent Loan for Undergraduate Students is a loan that is given to parents of undergraduates who are dependent and have enrolled at least half time. The disadvantage of this loan is the higher interest rates and the repayment does not start after graduation but starts when the student is still studying. This loan requires the student to have a clean credit record and have not experience financial problems like bankruptcy.

3. Perkins Loan
Unlike other loans, students do not have to wait half time to get this loan. The loan can be obtained right after a student is enrolled. It also offers a lower interest rate of 5%. This loan is especially needed by underprivileged undergraduates and graduates.

However, students have to remember that when applying for a federal student loan, they might not be getting a full amount. Instead, they will get a certain amount after deduction of certain fees. They have to be prepared for this and take this into consideration when preparing for their budget.

Categories: Federal Student Loan

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