All About Government Student Loans For College

For students and parents, government student loans are the best way to pay for college when personal finances fall short.

There are several loans available for those that are found to be in financial need, and these loans tend to have lower interest rates than private loans, though they usually offer limited loan amounts.

Perkins Student Loans

Perkins student loans are offered to students that have been found to be in serious financial need. Eligibility for Perkins loans are determined by the college the student is enrolled in. Loan amounts are also determined by the college.

Perkins loans are useful for students in dire financial need, but they cap out at $4,000 for undergraduates and $6,000 for graduates, so they do not usually cover the full cost of tuition.

Perkins loans have a fixed interest rate of 5%, regardless of the economy. They also do not need to be repaid until six months after the student is finished with school.

Stafford Loans

Stafford loans are the most common type of financial aid for enrolled students. Stafford college loans have two different loan types:

1)Subsidized - interest payments are paid by the government.

2)Unsubsidized - interest accrues while student is enrolled, though payments are not required until after deferment.

Subsidized Stafford loan amounts vary by the year you are enrolled in college, increasing for each additional year and capping out at $5,500 for juniors and seniors. Unsubsidized Stafford loans are available to all students that qualify, regardless of financial need.

While the United States Government decides federal student loan eligibility, only about half of all Stafford loans are actually provided by the government. Foundations and banks account for the remainder of the Stafford loans, the most notable being the Sallie Mae foundation. Sallie Mae government student loans, as well as other non-government Stafford student loans, are all subject to the same rules and rates.

These loans, like the Perkins loan, do not need to be repaid until six months after the student has finished college.

Parent PLUS loan

The Parent PLUS loan is another type of federal student loan that is available to all parents regardless of financial need. These loans are often used by parents that are unable to help pay for college despite their annual income. The only prerequisite for Parent PLUS federal student loans is good credit.

PLUS loans are incredibly useful, as loan amounts are designed to cover the remained of a child’s tuition after scholarships and other loans are taken out. This allows all parents to cover the entire remaining cost of their child’s education, if necessary.

PLUS loans are unsubsidized and do not have deferment options, so interest accrues while the student is enrolled in college and repayment starts immediately after the student is out of school.Since 2006, PLUS loans have also become available to graduate students with good credit.

Federal Student Loan Consolidation

After graduation, students and parents can opt for government student loan consolidation. This allows both parents and students who have taken out multiple federal loans to pay for college to combine these loans into one monthly payment. By limiting these loans to a single monthly bill as well as locking in a fixed rate based on the weighted mean of the loan interest rates, budgeting becomes significantly easier and borrowers are far less likely to forget or miss payments.

Government Student Loan Rundown

Federal loans are the simplest way to pay for college, and also the most beneficial. Though the Stafford and Perkins do not always provide enough money to pay for all of college, they have lower interest rates and are easy for borrowers to manage. These loans can also be easily consolidated, so repayment becomes an easier task. For a new student enrolled in college, these loans should be the first choice when financing your education.