Federal direct student loans are the best option for students who need to borrow money to pay for college. Unlike private student loans, federal direct student loans don't require credit history or a co-signer. They also offer borrowers more flexible repayment options and protections to prevent default.
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.
Given the option, you should accept a Direct Subsidized Loan first. Then, if you still need additional financial aid to pay for college or career school, accept the Direct Unsubsidized Loan.
As mentioned, federal direct loans are typically the best option. They have lower interest rates than Grad PLUS loans, and unlike private loans, they are eligible for income-driven repayment (IDR) plans and loan forgiveness programs.
However, borrowers must demonstrate financial need to qualify for subsidized student loans. Unsubsidized student loans are still a good option since they typically offer better rates and terms than private student loans — plus anyone can get an unsubsidized loan, regardless of income.
If you have federal student loans, they may be either subsidized or unsubsidized loans. It's typically best to focus on your unsubsidized loans first since they accrue interest during school and your grace period.
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)
Direct PLUS Loans are federal loans that graduate or professional students and parents of dependent undergraduate students can use to help pay for college or career school.
Students with unsubsidized loans do not get any breaks and interest starts to accrue as soon as the loan is paid out. Ultimately, it's best to use subsidized student loans if you qualify, as you will pay less over time than with unsubsidized loans.
Requirements for Grad PLUS loans
Be a graduate or professional student enrolled at least half-time at an eligible school. Be enrolled in a program leading to a degree or certificate.
That said, if you do decide to take on federal loans, it's generally wise to accept subsidized loans first because they offer more benefits in the form of government interest payments. Unsubsidized loans, on the other hand, put you on the hook for all of the interest that accrues on the loan.
Do student loans go away after 7 years? While negative information about your student loans may disappear from your credit reports after seven years, the student loans will remain on your credit reports — and in your life — until you pay them off.
Some drawbacks of federal direct loans are that there are no subsidized federal direct loans for graduate students, borrowers who default or become otherwise unable to repay their federal direct loans will not be able to escape them by declaring bankruptcy, and undergraduates who apply for direct unsubsidized loans and ...
Among undergraduate and graduate student loan options, federal direct subsidized loans are the cheapest and most flexible.
Federal student loans are broken down into four categories: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans and Direct Consolidation Loans.
Unsubsidized Stafford loans accrue interest while in school, during grace periods and deferment periods. Students are not required to pay the accumulating interest during these periods, but if you choose not to pay, it will be added to the principle amount of your loan.
While accepting scholarships and grants is often harmless, you should be careful about how much you accept in student loans. While borrowing money is often necessary for many students, borrowing more than you need can wind up costing you a lot more in the long run.
Once you receive an overage check from your financial aid, the Internal Revenue Service (IRS) may count this as income, so you will have to file taxes. This income might affect your FAFSA information.
If you're a parent or graduate student seeking a Direct PLUS Loan, one of the requirements to qualify is that you must not have an adverse credit history. If your application is denied because of an adverse credit history, don't give up. You still have options.
The yearly limit on an undergraduate PLUS Loan is equal to your cost of attendance minus any other financial aid you receive. For example, if your cost of attendance is $12,000 and you receive $4,000 in other financial aid, your parents could borrow up to $8,000.
The increased unsubsidized amounts that an eligible health professions student may receive are in addition to the regular $20,500 Direct Unsubsidized Loan annual loan limit for graduate and professional students.
$57,500 for undergraduates-No more than $23,000 of this amount may be in subsidized loans. $138,500 for graduate or professional students-No more than $65,500 of this amount may be in subsidized loans. The graduate aggregate limit includes all federal loans received for undergraduate study.
Private loans, administered by banks and credit unions, are much like any other kind of loan, meaning a credit check will be required. Federal loans are often needs-based, with lower interest rates and repayment flexibility. Those who do the necessary legwork will find options that best meet their needs.