What Federal Student Loans Can Do

Federal student loans are guaranteed by the government, which means if you default on any loan repayment the government will back the lender financially for the loss. As these loans are guaranteed by the government; this reduces a lending bank's risk, so the loan's interest rates are typically lower. Federal student loans are made available under two major loan programs authorized under the Higher Education Act (HEA) of 1965, as amended: the Federal Family Education Loan (FFEL) program, authorized by Title IV, Part B, of the HEA; and the William D. Federal student loans are the most affordable loans available to students, with best interest rates and deferred payments (principal and interest) until after graduation. Typically, Federal student loans are extremely low risk loans, as compared with other types of unsecured loans, in part because the Federal government guarantees them against default.

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Federal student loans for graduate students have higher limits: $8,500 for subsidized Stafford and $12,500 (limits may differ for certain courses of study) for unsubsidized Stafford. Federal student loans also offer distance learners the opportunity to pay for their online class tuition without draining their bank accounts or seeking additional employment. Federal loan borrowers are also given generous terms and may be able to defer loan payments if they return to college or are facing hardship.

For those accepting the Federal PLUS Loans for Graduate and Professional Degree Students, adult students may also take out PLUS Loans after exhausting the limits for other federal loan options. Federal Stafford loans also have cumulative or "aggregate" limits: graduate students may, in certain cases, borrow up to $138,500 inclusive of their undergraduate aggregate limit. Federal student loans are absolutely the best option for students and families who need to borrow to finance higher education. Federal employees face the possibility of having 15% of their disposable pay offset by the Department toward repayment of their loan through the Federal Employee Salary Offset Program. Note that the loans are made directly to the students. The government pays the interest on Federal Perkins Loans while the student is enrolled in school and for a nine month grace period following graduation. Those who cannot get a PLUS loan should be able to borrow directly from guarantee agencies, the companies or government agencies that back federal loans on behalf of the government and serve as lenders of last resort.

A positive point to note is that federal loans are some of the most affordable and almost everyone qualifies for some aid. You are free to choose your own lender for your federal loans. As a general guideline, students should always consider using federal student loans before you use any others. In summary, student loans commonly include federal student loans, private student loans, loans for students with bad or poor credit, student consolidation loans and alternative loans.

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