Federal student loans are broken down into four categories: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans and Direct Consolidation Loans. Within those categories, there are loan options for undergraduate students, graduate students, professional students and even parents.
Most students have two main options for student loans: federal (government) loans or private loans from banks, credit unions, and other lenders. You should research all your options for federal loans, also known as Direct loans, before shopping around for private loans.
A federal student loan is money that you or your parents borrow from the government to pay for your education and repay later with interest. Interest is the cost of borrowing that money, paid in the form of a percentage of your total loan amount. A higher interest rate means you pay more over time.
FSA programs include Federal Pell Grants, Federal Perkins Loans, Supplemental Educational Opportunity Grants (SEOG), the Federal Work-Study Program, the Federal Family Education Loan (FFEL) program, and the William D. Ford Federal Direct Student Loan Program (FDLP).
Types of Federal Student Loans
Your options for federal student loans include: Direct subsidized loans (also called subsidized Stafford loans) Direct unsubsidized loans (also called unsubsidized Stafford loans) Parent or graduate PLUS loans (also called direct PLUS loans)
Federal student loans are broken down into four categories: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans and Direct Consolidation Loans.
Unlike a subsidized loan, you are responsible for the interest from the time the unsubsidized loan is disbursed until it's paid in full. You can choose to pay the interest or allow it to accrue (accumulate) and be capitalized (that is, added to the principal amount of your loan).
Student loans can come from the federal government, from private sources such as a bank or financial institution, or from other organizations. Loans made by the federal government, called federal student loans, usually have more benefits than loans from banks or other private sources.
The federal Direct Loan program is better known as Stafford Loans. These are available to undergraduate and graduate students alike. Money for these loans comes directly from the federal government. Stafford Loans come in two types: subsidized and unsubsidized.
A subsidized loan is your best option. With these loans, the federal government pays the interest charges for you while you're in college. Here are the types of student loans.
Most student loans — about 92.5% — are owned by the government. Total federal student loan borrowers: 43.2 million. Total outstanding federal student loan debt: $1.60 trillion.
While federal loans are only available through the federal government, private student loans can come from other lenders. It's important to choose between federal vs. private student loans, as each has different interest rates, repayment terms, hardship options and fees.
Nelnet is a federal student loan servicer working on behalf of the U.S. Department of Education, the government agency that lends you or your child student loans. A loan servicer acts as the customer service provider for the loans that the Department of Education lends to borrowers.
Financial aid is either money that doesn't need to be paid back, known as gift aid, or earned through a federal work-study program. Student loans must be repaid within a given loan term. Not only are students expected to pay back student loans, but there's typically interest that accrues over the life of the loan.
Direct Unsubsidized Loans are available to undergraduate, graduate, or professional degree students enrolled at least half-time at a school that participates in the Direct Loan Program. Financial need is not required to qualify.
Ultimately, it's best to use subsidized student loans if you qualify, as you will pay less over time than with unsubsidized loans.
Direct Subsidized Loans are available only to undergraduate students who have financial need. Direct Unsubsidized Loans are available to both undergraduates and graduate or professional degree students. You are not required to show financial need to receive a Direct Unsubsidized Loan.
Types of federal student loans
Direct Subsidized Loans are based on financial need. Direct Unsubsidized Loans are not based on financial need.
Sallie Mae provides private student loans. Federal loans formerly managed by Sallie Mae were moved to other servicers.
Sallie Mae is not a federal loan servicer.
But in 2014, it split into two separate companies. The Sallie Mae of today took the name and became a consumer banking business. The other company became Navient. Importantly, the two companies are independent and not associated with one another.
Federal student loan borrowers don't have control over the loan servicer provided to them. Instead, the government assigns them to companies like Nelnet. If you're under Nelnet, they will oversee your balance and payments. You can inquire to them about your account and make payments to them directly.