Federal School Loans

These are study loans offered directly by the government or by way of guarantee on loans offered by private lenders to students for financing their educational needs. These loans are more beneficial than other alternative source of finance namely private loans.

Types of Federal School Loans

Federal School Loans are of two types namely

• Federal Family Education Loan (FFEL) program: These loans are offered by private lender institutions, guaranteed by guarantors and reinsured by the government. Following are the types of FFEL program.

• Stafford (Subsidized) – The interest portion of the loan is borne by the federal government. You can apply provided you spent at least half the time in school.
• Stafford (Unsubsidized) – Interest portion is to be paid even if the student is enrolled in the school. Offered to those with maximum borrowing capacity.
• PLUS – This enables parents to bear the cost of their children’s education.
• Perkins – This offers low interest loans to students who need finance for their post secondary education.

• Federal Direct Loan program: These are offered by the US department of Education directly to the students. They are as follows

• Direct Subsidized Consolidation Loan - Under these loans eligible for interest subsidies such as FFEL, federal direct loans and federal Perkins loan can be combined for consolidation.
• Direct Unsubsidized Consolidation Loan – Federal student loans not eligible for interest subsidies qualify for consolidation under this scheme.
• Direct PLUS Consolidation Loan – Consolidates FFEL PLUS and Direct PLUS loans.

Benefits of Federal School Loans

These are the single large source of college loans. The following benefits flow from Federal School Loans

• Comparatively lower interest rates
• Interest paid by the government under certain schemes
• No repayment until you complete schooling
• Flexible and longer repayment term
• Flexible credit requirements