Federal Student Loans
Federal Student loans are college loans that are backed and regulated by the federal government. These loans usually have lower interest rates, and Congress as well as the U.S. Department of Education create the rules and regulations associated with them.
Federal Loan Programs
According to Sallie Mae, federal programs are the single largest source of college loans.
The two most commonly used federal programs are:
- Federal Family Education Loan Program (FFELP)
- William D. Ford Federal Direct Loan Program (FDLP)
The Federal Family Education Loan Program (FFELP) is more popular because there are many different places to apply for this type of loan including:
- Education financing companies
- Credit unions
- Private banks
FFELP loan terms:
- Longer repayment period
- Possibility of your interest being paid by the federal government while attending school
- Lower interest rates
- Possibility of more flexible credit requirements
The William D. Ford Federal Direct Loan Program or (FDLP) has the same terms as above. The biggest difference between the two is that the FDLP money comes directly from the US Department of Education.
In addition to the federal programs, there are also many different types of federal student loans.
The most common are:
- Stafford loans
- Perkins loans
- Parent Plus loans
- Grad Plus loans
- Federal Direct loans
Stafford loans are federal loans for both graduate and under-graduate students. Since July 1, 2006, the interest rate for a Stafford loan is fixed at 6.8%.
These loans are designed to assist people that are more in need.
Perkins loans are another loan that is more geared towards the financially challenged. They too have a fixed rate at 5%, and they do not have any default or origination fees. These loan funds are provided by the federal government and the particular school.
Federal Direct loans are loans that are provided directly from the US Department of Education.
Grad Plus loans are loans granted to professional or graduate students that are enrolled in at least half time (six credit hours or more).
Parent Plus loans are available for parents that have a dependent student in college and are designed to help supplement the costs.
Why Federal Student Loans
Federal Student loans have better terms than private student loans and are more accessible for people that may be finacially challenged. Again individual situations will dictate which loan is right for you.
