In the US, many students who want to get into college or even graduate school resort to applying for a government student loan for financial aid. These programs allow them to focus on academics and not on the money they need to stay in school. Many universities, colleges and trade schools participate in providing such financial assistance guaranteed by the Federal government.
There are several different types of loans offered to students who want to enter college. There’s the William D. Ford Federal Direct (Direct) Loan and Perkins/Nursing Student Loan Programs (funds are loaned to the student directly), the Federal Family Education Loan (FFEL), and PLUS loans where the student’s parent stands as the borrower. The FFEL and other direct loans are categorized as Stafford Loans. These are the most common type of loans availed by students in need. The only thing that sets these two apart is where the money lent comes from. FFEL lends money from union banks guaranteed by the Federal government. On the other hand, Direct loans come directly from the government itself.
Stafford loans could either be subsidized or unsubsidized depending on the applicant’s qualifications. When a government student loan is subsidized, the government pays for the interest while the student is still in school. Meanwhile, the unsubsidized student loan requires the person to pay for the interest or defer the loan until he/she has graduated from college. An interest rate of 5.6% is charged for subsidized loans while 6.8% is charged for unsubsidized loans. These are to be reduced in the following years dropping down to 4.5% in 2010 and 3.4% in 2011 for loans disbursed after July 1 of each year.
Perkins and Nursing loans are also offered to students in need. However, these loans are not provided by neither a private group outside the college nor by the government but by the school itself. Payment is made directly to the school nine months after graduating. As the name implies, Nursing loans are granted for Nursing students while the former doesn’t require a specific field of study in order for an applicant to qualify.
Another option in applying for government student loans is the PLUS or Parent loan. As the name implies, this is the only federal loan which requires a good credit rating since the parents are the ones borrowing for the student. Interest may be lower or higher depending on federal rates. Also, terms of payment will be discussed with the student or parents prior to graduation. This is done through a session called “exit counseling” wherein payment terms will be discussed and plans will be chosen.
Government student loans may seem simple and common. As common as all the other benefits citizens gain from the government. These loan programs, no matter how simple, do make a world of difference. Sending students to college allows them to get better jobs, giving them a brighter future. These also make them capable of repaying the loans they have acquire during college, paving the way for future graduates.