Federal Student Loan Program | Types | Application | Limit

Federal Government Student Loan

Federal Student Loan Program – Federal Student Loan is a program made up of administered and financed by the federal government. It is a monetary aid provided for the students.

These loans are provided by the federal government through the US Department of Education. Just like other loans available, the federal student loan is being repaid with interest, like other loans you get to borrow from other loan institutes.

However, interest rates included in the federal student loan are lower than private student loans with better and more efficient repayment choices.

Federal Student Loans has an interest rate that doesn’t get to change anytime soon. The choice of the type of loan made by such a student will determine its interest rate.

Federal Student Loan also has an origination fee. This means that the fees are being summed up together as a percentage of the loan amount. This shows that the amount you borrow could be more than the actual amount that you’ll receive.

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Federal Student Loan Program – Types of Federal Student Loans Program

Loan

Eligible Students

Direct Subsidized Undergraduates with financial need
Direct Unsubsidized Undergraduates, graduates, and professional students
Parent PLUS Parents of dependent undergraduate students with no adverse credit history
Grad PLUS Graduate and professional students with no adverse credit history
Consolidation Loans Most borrowers with federal student loans

Direct Subsidized Loans

Interest rate: 4.99%

Origination Fee: 1.057%

Grace Period: 6 months

Direct Subsidized Loans are a type of Stafford Loan predesigned for use by undergraduate students, who have the need for finance as clearly stated by FAFSA ( Free Application for Federal Student Aid).

As a Direct type of loan, the amount that is to be received by each student is determined by the school which the student attends. This is determined by the cost of tuition and other related expenses.

With the use of Direct Subsidized Loans, the government gets to pay the interest of the loans while the student is being enrolled in the school for at least half-time in school which includes periods of grace and deferment.

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This feature provided by the Direct Subsidized Loan makes it the most favorable type of loan provided by the Federal Government to students.

Direct Unsubsidized Loans

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

Origination Fee: 1.057%

Grace Period: 6 months

Direct Unsubsidized Loans are different from Subsidized Loans. Direct Unsubsidized Loans don’t require any financial need to qualify for such a loan. In this case, the government doesn’t get to fund accumulated interest during the deferment period and the period while you are in school.

Apart from the other financial aid being received, the amounts you can get to borrow stem from the total cost of attendance. This amount gets to be determined by the school which you are attending.

Parent PLUS Loans

Interest Rate for the 22/23 Academic Year: 7.54%

Origination Fee: 4.228%

Grace Period: A grace Period is not available, but parents may request for deferment for 6 months after their child leaves school.

Parent PLUS Loans are a type of PLUS loan specified for parents who have an undergraduate-level student that is dependent and is getting an education from a qualified school.

In other to borrow such a loan, the borrower is expected to be the biological or real parent of the student as guardians of the student are not eligible to borrow such loans. Before such a loan is paid off, the federal government gets to run a credit check to be sure there has never been any illegal or adverse credit history.

The school the student attends then gets to receive the Parent PLUS loan while the remaining loan amount is then sent to the parents of the student. Payments are then expected to be carried out as the loan has been received.

Grad PLUS Loans

Interest Rate for the 22/23 Academic Year: 7.54%

Origination Fee: 4.228%

Grace Period: 6 Months After Leaving School

Graduate students who are attending school at least part-time may get to qualify for the Grad PLUS Loan. Such graduate students must get enrolled in the program that will get them an advanced degree or professional certificate in other to qualify for the Grad PLUS Loan.

All borrowers who seek the Grad PLUS Loans must get to meet the other qualifications for receiving financial aid directly from the Department of Education.

Immediate repayment of loans while in school isn’t required in the Grad PLUS Loan. However, grad students may choose to defer their payments while still in school part-time for up to six months after graduation.

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Consolidation Loans

Interest Rate for the 22/23 Academic Year: Weighted average of federal loans being consolidated rounded up to the nearest eighth of a percentage

Origination Fee: None

Grace Period: 60 Days After Disbursement Of Loan.

A consolidation Loan is a type of loan meant for students who have multiple student loan accounts and wish to combine them to be one.

By carrying out this process, those who get to borrow loans simplify their repayment to just one monthly amount, which makes them eligible for other repayment loans or loan forgiveness in the future.

Students who are under the consolidation loan do not get to undergo a credit check or consigner. This may require of them higher interest rates overall than keeping the loans in different accounts.

Federal Student Loan Program – Application

Students who are interested in the federal student loan and want to be eligible will have to fill out the FAFSA form. While seeking to apply, you must not be owing any federal financial aid refund or be in default on any federal student loan. You must get to meet the eligibility requirements in other to receive the federal student loan and must not be in default on any of the federal student loans or owe federal financial aid.

The student will have to sign a Master Promissory Note and also get to complete a loan entrance interview session online or in person. All this information will be made clear by the institute in which you attend and step-by-step procedures to take.

Federal Student Loan Program – Borrowing Limits

All federal student loan has constrained limits to loans which are based on the year of attendance, whether the student is dependent or independent, and other aids that are being provided financially. Below are the different limits to loans grouped by each year in the institute.

  1. First-Year Undergraduate Students – Dependent students who are first-year undergraduates can borrow $5,500 with no more than $3,500 in subsidized loans while independent students get to borrow $9,500 with no more than $3,500 in subsidized loans.
  2. Second-Year Undergraduate Students – Dependent students can get to borrow an amount of $6,500, with no more than $4,500 in subsidized loans while independent students get to borrow $10,500 with no more than $4,500 in subsidized loans.
  3. Third-Year and Beyond Undergraduate Students- Dependent students can get to borrow $7,500 with no more than $5,500 in the subsidized loan while independent students get to borrow $12,500 with no more than $5,500 in the subsidized loans.
  4. Graduate and Professional Students- Graduate students can get to borrow $20,500 of the unsubsidized only. The loan limit for dependent students is $31,000 with no more than $23,000 as subsidized. Independent undergraduates can get to borrow $57,500, with no more than $23,000 in subsidized loans, while graduate and professional students can borrow $138,500, with no more than $65,500 in subsidized loans.
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Federal Student Loan Program – How to Qualify

Below is the information required to be able to qualify for the federal student loan

  1. Must be a citizen of the U.S. or an eligible non-citizen.
  2. Must possess a legal Social Security number
  3. Must be enrolled or qualified for enrollment as a student with a notable degree or certificate program
  4. Must maintain academic progress in school
  5. Must show that you are eligible to gain a college degree or career school education
  6. Must show proof of not a default on any existing federal student loans.

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 the 4 types of student loans?

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

What is the maximum amount you can borrow in federal student loans?

Undergraduates can manually get to borrow up to $12,500 and $57,500 total in federal student loans. Graduate students can get to borrow up to $20,500 manually and $138,500 total.

What is the most common federal student loan for students?

Direct Subsidized and Direct Unsubsidized Loans (known as Stafford Loans) are known to be the most common type of federal student loans for both undergrad and graduate students.

How do I get to qualify for student loans?

Below are the steps that must be carried out to be qualified

  1. Be a citizen of the U.S. or an eligible non-citizen.
  2. Possess a legal Social Security number
  3. Be enrolled or qualified for enrollment as a student with a notable degree or certificate program
  4. Maintain academic progress in school
  5. Show that you are eligible to gain a college degree or career school education
  6. Show proof of not being a default on any existing federal student loans.

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