What Are Government Student Loans?

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. Read on to know more about federal student loans in more detail.

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Federal Student Loans

1. Direct Loan

One of the most common types of government student loans used by student borrowers are Direct Loans. These Federal Student Loans are subdivided into two categories: subsidized and unsubsidized loans.

Direct subsidized loans are for undergraduate students needing financial assistance.

In contrast, undergraduate students qualify for direct unsubsidized loans, regardless of their financial capacity.

With subsidized student loans, the federal government pays for the interest accrued while the student is still 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 wish to take up 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, student borrowers 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 need special financial assistance as determined by the school.

The Perkins loan comes from a revolving budget jointly funded by the federal 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. Stafford Loan

Stafford Loans is a type of federal student loan which aims to help students with minimum to no credit to earn a bachelor’s degree. This federal student loan provides financial aid and scholarships to student borrowers.

Instead of basing the borrower’s eligibility on their credit score, it is determined based on the eligible income bracket; and whether they have no history of student loan default.

Through this federal loans program, you can borrow up to a maximum of $20,000 every year. But it is dependent on your degree’s status and the number of years you are in school.

The Stafford loan offers student loan deferment and loan forgiveness program.

6. Federal Consolidation Loan

Federal Consolidation loans are a combination of federal student loans offered to simplify payment.

A student can use as many as a dozen federal 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.

7. State Student Loans

State student loans are comparable to private student loans, only they are more accessible and affordable.

In order to qualify for state student loans, students should either be studying or residing in a certain state. Selected state loans compel the student to settle at least the interest during their time in school.

Bear in mind that terms and conditions vary per state. So it is important to check your state’s website or inquire to the loan servicers in your state.

Want to know more about government student loans? Watch this video from Federal Student Aid:

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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 plan and financial aid.

If you are having difficulties with your student-loan debt from your private student loans and want to consider loan forgiveness, check out these 6 jobs that offer student loan forgiveness.

Do you know other advantages and disadvantages of government student loans? Let us know in the comments below.

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