Federal Student Loan Program | Types | Application | Limit

Federal Student Loan ProgramFederal Student Loan – This program is administered and financed federally. It provides monetary assistance to students.

The federal government provides these loans through the US Department of Education. The federal student loan can be repaid in the same way as other loans. Interest is charged on it, just like other loans.

Federal student loans have lower interest rates than private student loans, which offer better repayment options and are more efficient.

Federal Student Loans have an interest rate that isn’t likely to change in the near future. It all depends on the type of loan chosen by such a student.

Federal Student Loans also have an origination fee. The fees are added together to make a percentage of your loan amount. This means that your actual loan amount could be higher than what you actually borrow.

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Federal Student Loan Program – Types of Federal Student loans Program

Lending

Eligible Students

Direct Subsidized Financial need undergrads
Direct Unsubsidized Graduates, professionals, and undergraduates
Parent PLUS Parents of undergraduate students who are dependent and have no adverse credit history
Grad PLUS Professional and graduate students without any adverse credit history
Consolidation loans Federal student loans are the most popular option for most borrowers

Direct Subsidized Loans

Interest Rate:4.99%

Origination fee:1.057%

Grace Period6 Months

Direct Subsidized Loans (also known as Stafford Loans) are predesigned for undergraduate students who need finance according to FAFSA (Free Application for Federal Student Aid).

The school where the student is enrolled determines the amount of Direct loans that they will receive. This is determined by tuition costs and related expenses.

Direct Subsidized loans allow the government to pay the interest while the student is enrolled at the school at least half-time. This includes grace periods and deferment.

Direct Subsidized Loans are the most attractive type of Federal Government loan available to students.

Direct Unsubsidized Loans

Interest Rate for 22/23 Academic Years: 4.99% (undergraduate), 6.54% (graduate, professional degrees)

Origination Charge: 1.057%

Grace Period 6 Months

Subsidized loans are not available for Direct Unsubsidized Loans. Direct Unsubsidized Loans are available to anyone who is eligible. The government won’t pay interest accrued during the deferment period or while you are in school.

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Other than financial aid, the total cost of attendance determines how much you can borrow. The school you attend will determine the amount.

Parent PLUS Loans

Interest Rate for 22/23 Academic Year: 7.54

Origination Charge: 4.228%

Grace Period While a grace period is not possible, parents can request deferment for six months after their child leaves school.

Parent PLUS Loans are a type if PLUS loan that parents can get for their dependent undergraduate student who is pursuing an education at a school of high quality.

To be eligible for such a loan, the borrower must be the biological parent or legal guardian of the student. The federal government can run a credit check before such loans are paid off to ensure there have been no criminal or adverse credit histories.

The Parent PLUS loan is given to the school where the student is enrolled. Parents receive the balance of the loan amount. Once the loan is received, payments are expected to be made.

Graduate PLUS Loans

Interest Rate for 22/23 Academic Year: 7.54

Origination Charge: 4.228%

Grace Period: 6 months after leaving school

Grad PLUS Loans may be available to students in graduate school who are at least partially enrolled. To qualify for the Grad PLUS loan, such graduate students must enroll in a program that leads to an advanced degree or professional certificate.

Grad PLUS Loans are available to all borrowers who meet the requirements for financial aid from the Department of Education.

The Grad PLUS Loan does not require immediate repayment of loans while you are in school. Grad students can defer their payments for up to six month after graduation, however.

Consolidation loans

Interest Rate for 22/23 Academic Years: The Weighted Average of Federal Loans Consolidated, Rounded up to the nearest eighth

Origination fee: None

Grace Period 60 days after disbursement of loan

Consolidation Loans are for students with multiple student loans accounts who wish to merge them into one loan.

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This allows those who borrow loans to reduce their monthly payments to one amount. They are eligible for repayment loans and loan forgiveness in the future.

Consolidated loan students do not have to go through a credit check. They may have to pay higher interest rates than if they had the loan in separate accounts.

Federal Student Loan Program – Application

FAFSA forms are required for students who want to apply for the federal student loan. You must not owe any federal financial aid refunds or be in default on federal student loans while you apply. To be eligible for a federal student loan, you must meet all eligibility requirements. You also must not be in default of any federal student loans.

The student will need to sign a Master Promissory note and may also be required to attend an online or in-person interview for a loan. The institute where you are enrolled will provide all the information and explain the steps to follow.

Federal Student Loan Program – Borrowing Limits

Federal student loans have strict limits. These limits are determined by the student’s year of attendance, financial aid received, and dependent or independent status. Here are the limits on loans for each year at the institute.

  1. First Year Undergraduate Students –Dependent undergraduates can borrow $5500 with no more that $3,500 in sub-subsidized loans, while independent students can borrow $9,500 with no less than $3,500.
  2. Second Year Undergraduate Students –Dependent student can borrow $6,500 with no more that $4,500 in sub-subsidized loans, while independent students can borrow $10,500 with no more then $4,500.
  3. Third-Year or Beyond Undergraduate Students –Dependent student can borrow $7,500 with no more that $5,500 in subsidized loans, while independent students can borrow $12,500 with no less than $5,500 subsidized loans.
  4. Graduate or Professional Students-Graduate can borrow $20,500 only. Dependent students can borrow no more than $31,000 and not more than $23,000 in subsidized loans. Unattached undergraduates can borrow $57,500 with no more that $23,000 in subsidized loan, while professional and graduate students can borrow $138,000.

Federal Student Loan Program – How to Qualify

Here is what you need to know to qualify for a federal student loan

  1. You must be a citizen of the U.S.A or a non-citizen eligible for citizenship.
  2. You must have a legal Social Security Number
  3. You must be enrolled in or qualified to enroll as a student with a noteworthy degree or certificate program
  4. Maintain academic progress at school
  5. You must prove that you are eligible for a college or career school degree
  6. You must show proof that you are not in default on federal student loans.
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Federal Student Loan Program – Servicers

  1. Nelnet
  2. Great Lakes Educational Loan Services, Inc
  3. Navient
  4. FedLoan Servicing – (PHEAA).
  5. MOHELA
  6. HESC/EdFinancial
  7. CornerStone
  8. Granite State – GSM&R
  9. OSLA Servicing

Conclusion – Federal Student Loan Program FAQs

What are 4 types of student loans available?

  1. Direct subsidized loans.
  2. Direct unsubsidized loans.
  3. Direct PLUS loans.
  4. Direct consolidation loans.

What is your maximum federal student loan amount?

Students can borrow as much as $12,500 in student loans and up to $57,500 for their undergraduate studies. Students can borrow as much as $20,500 and $138,000.

What federal student loan is most popular for students?

Direct Subsidized Loans and Direct Unsubsidized Loans (also known as Stafford Loans) have been the most popular federal student loans for undergrads and graduates.

How can I qualify for student loans?

These are the steps you need to take in order to become qualified

  1. You must be a citizen of the U.S.A or a non-citizen eligible to apply.
  2. Legal Social Security Number
  3. You can be enrolled in or qualified to enroll as a student with a notable certificate or degree program
  4. Continue to make academic progress at school
  5. Demonstrate that you are eligible for a college or career school education.
  6. You must show proof that you are not in default on federal student loans.

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