Want To Get A Federal Student Loan? Here Are The Different Types
The university and college student each year have to pay thousands of dollars to complete their degree program. Some students head toward the financial aid to lessen the burden and think of getting a loan. But which type of loan will benefit you the most in pursuing your studies and not stressing you out about the repayment of the loan.
Before applying for any student loan, you must know the basics behind each type of loan. Without knowing the differences among different student loan types, you can choose to get the loan which rather than giving you financial peace can stress you out. Therefore, we are going to tell you the different student loan types which you encounter while applying.
It is free financial aid from the government which is given to the students who fill out the free application form for federal student aid each year. Then after reviewing your application, you are assessed based on your income and expenses and the college costs annually. Different types of federal loans are available to lend to the college students. But each of them has affixed maximum amount which you can borrow. A good thing about federal loans is that these can be easily paid off using student loan consolidation. Different types of federal loans are:
- Direct Subsidized Loans
These federal loans are for the college students who are in financial need. They offer lower interest rates, and the interest rate is not changed throughout the life of the loan. It can help you to save money by paying lower interest rates. But as you have to apply each year for the loan the interest rate may vary from our previously approved federal loan interest rate. The benefit of subsidized loans is that the government have to pay off the interest that accumulates during the time you are studying in school or college.
- Direct Unsubsidized Loan
These are approved for the students who are not in a financial need but don’t have enough money to pay the college fee. These also have lower interest rates. The difference from the subsidized loans is that all the interest accruing throughout the repayment has to be paid by you (borrower) which ultimately increases the overall loan repayment amount.
- Direct Plus Loans
If the student has taken student loans but still are not enough to cover the whole educational costs then, the direct PLUS loan can be applied by your parents to fulfill your educational costs. The con of these PLUS loans is that they have fixed interest rate but much higher than the subsidized and unsubsidized loans.
- Federal Perkins Loans
This type of federal loan is the best choice for the students with financial needs. These have a fixed interest rate of 5% which is higher than subsidized and unsubsidized. You can borrow up to $5000 per year which is much higher than the other three types. But the drawback is only a few colleges participate in this type of loan.