Government student loans are loans offered to those who are pursuing a college education.
These loans typically have lower interest rates and more flexible payment options compared to student loans offered by private banks.
Government student loans are available in two forms, federal student loans and state student loans.
Below we discuss federal student loans in more detail.
What Do Government Student Loans Offer?
Federal Student Loans
1. Direct Loan
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Direct loans are the most common government student loans used by students.
These loans are subdivided into two categories, direct subsidized loans and direct unsubsidized loans.
Direct subsidized loans are for undergraduate students who need financial assistance.
In contrast, direct unsubsidized loans are for undergraduate students, regardless of their financial capacity.
With subsidized student loans, the government pays for the interest accrued while the student is enrolled in school or during times of authorized deferral.
In contrast, unsubsidized loans’ interest is compounded on the balance.
2. Grad Plus Loan
Students who aspire to attend graduate or professional education can take advantage of Grad Plus loans.
Similar to Parent Plus loans, these loans are unsubsidized.
However, instead of parents, graduate students take out these loans.
The Grad Plus loans also have forbearance and federal deferment options.
Furthermore, graduate students can choose to delay their payment plans while they are enrolled at least part-time in a degree or certificate program.
3. Parent Plus Loan
As mentioned above, parents of undergraduate students can use Parent Plus loans.
To qualify, the student must enroll in a college or university participating in the Title IV federal student aid program.
Similar to the Grad Plus loan, Parent Plus loans are also unsubsidized.
Parent Plus loans cover the full cost of college, though they have a higher interest rate than other loans.
4. Perkins Loan
Colleges and universities offer undergraduate students subsidized loans known as Perkins loans.
This loan has a fixed interest rate of 5% and is given to students who exhibit special financial assistance need as determined by the school.
The Perkins loan comes from a revolving fund jointly funded by the government and colleges and universities.
These loans have an annual limit of $5,500 for undergraduate students and $8,000 for graduate or professional degree students.
5. Federal Consolidation Loan
Federal Consolidation loans are a combination of federal loans offered to simplify payment.
A student can use as many as a dozen government student loans during their time in college.
With so many loans to juggle, paying them off can be a challenge.
Additionally, borrowers should keep in mind that the more student loans they get, the higher the interest they’ll pay for all these loans.
Consolidation aims to solve these problems.
Unfortunately, state-federal loans cannot be consolidated into government consolidation loans.
6. State Student Loans
State student loans are comparable to private student loans.
Loan eligibility is for students either studying or residing in a certain state.
Selected state loans compel the student to settle at least the interest during their time in school.
Want to know more about government student loans? Watch this video from Federal Student Aid:
Government student loans vary depending on the need of the student going to college.
These flexible government student loans give you options, whether you’re an undergraduate or a graduate student.
Most of these loans offer low-interest rates and typically do not involve credit checks.
Government student loans also give flexible repayment terms and options.
Do you know other advantages and disadvantages of government student loans? Let us know in the comments below.
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