What you need to know about federal student loans - CCCU
Tuesday, October 30 CCCUWhat you Need to Know About Federal Student Loans
With over 71%
of students in the United States using student loans to finance their education, understanding how to borrow and repay your loans responsibly is essential. Learn about which types of student loans can be obtained from the government, how borrowing and repayment work, as well as valuable resources to help you calculate your needs and consolidate existing
Direct vs. Indirect Student Loans
If you have federal student loans, the odds are they are either direct or indirect. These loans, unlike private student loans, have to do with the government, and are unlike other personal loans you might get for houses, cars, or business.
Direct Student Loans
A direct student loan is provided by the United States Department of Education.
Indirect Student Loans
In the past, indirect student loans were an option. However, in 2010, this program ended. While the program may be over, many still have loans from this period and can benefit from understanding how the program works.
Indirect student loans are provided by private institutions, guaranteed by the federal government. While the government does not insure these loans, they act through a guarantor. If you are unable to pay your loan and have to default, the guarantor will pay back the private institution for the loan. The government will then reimburse the guarantor.
In these situations, with a Federal Family Education Loan (FFEL) / indirect loan, you’ll deal with the lender, guarantor, or collection agency--not the government.
Types of Federal Student Loans
While there are only direct loans available now, there are still various types of direct loans available.
The most common are stafford loans. These can be subsidized by the federal government for need-based loans, or unsubsidized.
Subsidized loans won’t accrue interest while you’re in school, or any additional deferment time you have. Unsubsidized loans will accrue interest, even while you’re in school.
If you need additional loans to help cover costs, Plus loans are an option. These federal loans require a credit check, and you can use a co-signer to help you qualify. These loans also include Parent Plus loans, where parents can help students get enough loans to cover the costs of school. However, parents are then responsible if their children default. These can also disqualify the borrower from income based repayment.
Learn more about federal student loans
If you currently have a federal student loan, you can look it up in the National Student Loan system here
You can also learn more about what’s available to you at StudentLoans.gov
. There you can learn about different loan options, repayment plans, parent loans, and how to consolidate your student loans safely.