Federal Student Loans, Explained
In order to assist students in paying for their college and post - graduate education, Governments of most countries offer student loans. Typically, such loans carry a lower interest rate, compared to commercial loans and they are mostly issued and approved by the government.
In the U.S.A., the most common student loan scheme is characterized by the federal student loan policy. The rules regarding federal loans can be found under the Title IV of the Higher Education Act, as amended. This type of loan is available for college and university students by disbursing funds directly to the schools. These funds are used as a supplement to the tuition fees and other school-related expenses of a student.
The U.S. Department of Education guarantees both subsidized and unsubsidized loans. Sometimes, guarantee is granted directly and other times pass through guarantee agencies. Aspects like credit score are not taken into consideration when granting a student a loan. Nearly all students are eligible to receive federal loans. Typically, a student loan comes with a grace period of six months, which means that no payments are due until six months after the graduation.
The amount limit a granted loan would depend on the status of the student. Freshman undergraduate students can get a maximum of $5,500 a year, sophomores could get up to $6,500 and both juniors and seniors can get up to $7,500. For independent students, the maximum amount of annual loan granted is significantly higher.
Students who may need more money than the amounts mentioned above could try to get their parents to apply for a PLUS Loan or Parent Loan for Undergraduate Students. In this case, the parents make the loan, and much large sums can be borrowed. However, there is no grace period. Paying back starts immediately. With PLUS Loans, the student is not responsible for the balancing of loan, but the parents. This difference must be kept in mind!
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