What are federal student loans? These loans are generally the first loans students turn to in order to finance their college education.
The Government Wants to Help Students
The federal government sets aside a predetermined amount of money for students to borrow each year. In filling out a FAFSA form, students have the opportunity to secure a loan of this money, with a lower interest rate than typical private lenders. The students will secure loans up to $5500 per calendar year when the student is in their first years of school, but the amount can be more the more schooling they have. These funds are to be used for tuition and for any other school expenses which might be incurred.
Students may opt to accept less than the amount they are offered on the student loans, allowing them to reduce their student loan debt and to decrease the interest they will need to pay back. Federal student loans need to be paid back within ten years of graduation, though students can defer the loans or request a forbearance if they are in a poor financial situation. In either case, student loan interest will still be incurred as the loan is not being paid, causing the final bill to be much larger than if the student had simply paid down the loan.
Some possible federal student loans include:
- Direct Loans – subsidized and unsubsidized
- Stafford Loans