Availing of Federal Student Loans

Ever heard of federal student loans? Living in a country where students are fully supported by the national government in their pursuit of a college education is a blessing to its citizens.  The cost of education has risen all over the world and very few can afford to send their children to college and after graduation spend for their graduate studies. In such situations, these student loans are the only hope of interested parents and students. In this regard the government has not failed them for it can provide many loan options for them to choose from.

Overview of Federal Student Loans

The biggest federal student’s loan provider is the William D. Ford Student Loan program. They have the most lenient eligibility requirements, lower interest rates and convenient repayment terms. The student borrower has a wide variety of loans to choose – loans with easy payment terms of 10 -12  years or loans with longer terms of up to 20 – 30 years depending on the capacity of the borrowers to pay. It would be excellent if the students can get their federal student loans from this source.

However, this is not always the case. Increases in expenses, adjustment of curriculums and new choices of the students sometimes necessitate the procurement of more loans and fund assistance from other sources. The direct federal student loans they can get from the government grants are just part of the many sources of financial assistance available for students. Aside from the direct loans there are funds in the form of trusts and study grants which are not repayable. There are also work grants under the Federal Work Study (FWS) program designed to give jobs to students to augment their income.

Students are always given the option to get the loans from the federal government.  There are many conduits or outlets through which government funds are loaned out. Direct loans to recipients are handled by the U.S. Department of Education and these comprise a huge part of federal student loans granted.  Federal Stafford Loans are low-interest federal loans handled by the participating school, college or university for qualified undergraduate and graduate students. It is a major part of the W.D. Ford Student Loan program.

Other Sources of Federal Student Loans

There are many grants available most of which are school based all designed to provide financial aid in their college education, typical grants are the Academic Competitiveness Grants (ACG), National Science and Mathematics Access to Retain Talent (SMART) Grants and Teacher Education Assistance for College and higher Education.  Direct loans can also be given in the form of private student loans by private entities like Chase and Private Student Loan, which are all part of the bigger Student Loan Network.    Direct Plus Loans are additional loans based on the additional need of the students and the capacity to pay situations of loan co-makers and guarantors like parents and step-parents. Perkins fund is also a federal direct loan provider which used to be the assistance loan funds for military servicemen and evolved into loan provider for most types of qualified applicants, both under graduate and graduate students. Private loan providers participate and act like federal student loans provider because of their huge capital outlay.

Repayment of Federal Student Loans

With regards to imposed interest, there is a ceiling imposed on loan providers especially if sourced from federal funds, over which they can not go beyond.  The result is that the average over-all interest for federal student loans goes down or is maintained at low levels. This is also true in non federal student loans since privately sourced or personal loans can not compete with the government sourced loan providers if they do not follow the interest rates set for federal student loans repayment set by the government.

Multiple loans can be availed of simultaneously depending on the apparent need of the students. To make federal student loans payment easy, some institutions agree to pay all the loans of an individual and offer to be the consolidated creditor of that student, usually payable after graduation. In this way, the repayment for multi-sourced loans is given to only one creditor, usually the holder of a consolidated loan agreement. Student loan consolidation helps in reviving defaulted federal student loans and help students who are unable to pay their loans on time.

When one cannot pay a federal loan, the first option is an extension of the repayment dates. The repayment is moved back to accommodate the capacity to pay of the borrower.  Another option is the adjustment of the amortization to a lower amount to accommodate the payment capacity of the student-borrower.  This will also extend the installment period. Actually this is already restructuring of the loan transactions incurred during the school days of the student and setting the repayment at a point in time after graduation. School counselors can assist the students in such cases to determine which type of federal financial aid to avail of.

All of the above mentioned loans, grants, federal student aid with interests and repayment plans cannot be fully availed of without the submission of a well prepared FAFSA or Free Application for Federal Student Aid.  This is an application form that the student-borrowers fill up when they avail of loans from the federal government and other sources.  This is a most comprehensive document devised for the purpose of loan processing in the educational sector. It gives a complete picture of the actual needs of the student and the financial standing of the student and his/her immediate family. This form must be properly filled up since it will become the major basis or reference point of the students in all his loan transactions with the federal government.  A properly filled up form ensures a good consideration of all future applications for federal student loans.