Federal Student Loans:
Federal Student Loans: The U.S. Department of Education offers several types of federal student loans, including Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Perkins Loans. These loans have fixed interest rates and generally offer more favorable terms and repayment options compared to private loans.
Private Student Loans: Private lenders, such as banks and credit unions, also provide student loans. Private loans typically have variable interest rates and may require a credit check or a cosigner, especially for undergraduate students who may not have established credit histories. The terms and conditions of private loans vary among lenders.
Eligibility: To be eligible for federal student loans, students must be U.S. citizens, permanent residents, or eligible non-citizens. They must also enroll in an eligible degree or certificate program at an accredited institution on at least a half-time basis. Private loan eligibility criteria may differ depending on the lender.
Loan Limits: The loan amount a student can borrow depends on factors such as their year in school, dependency status, and whether they are considered a dependent or independent student for financial aid purposes. There are both annual and aggregate loan limits for federal student loans.
Interest Rates: Federal student loan interest rates are determined by Congress and are fixed for the life of the loan. Private student loan interest rates, on the other hand, are set by individual lenders and can be fixed or variable.
Repayment: Federal student loans offer various repayment options, including standard repayment, income-driven repayment plans, and extended repayment plans. Private loans may have different repayment options depending on the lender. Repayment typically begins after a grace period following graduation, dropping below half-time enrollment, or leaving school.
FAFSA: To apply for federal student loans, students must complete the Free Application for Federal Student Aid (FAFSA) annually. The FAFSA determines a student's eligibility for federal aid programs, including grants and work-study opportunities, in addition to loans.
Loan Forgiveness and Repayment Assistance: There are loan forgiveness programs available for certain federal student loans, such as Public Service Loan Forgiveness (PSLF) and Teacher Loan Forgiveness. Income-driven repayment plans also offer potential loan forgiveness after a specified period of repayment.