If you’re a student, there’s a good chance that you need to borrow money in order to pay for your education. You may also be wondering what types of federal student loans are available so that you can make an informed decision about how to fund your college education. Are federal student loans secured or unsecured? Experts like Lantern by SoFi say, “Most federal student loans don’t need a credit check, allowing the student to borrow in their name. An unsecured federal student loan is an attractive option for many borrowers.”
In this article, you will learn about the different types of federal student loans and how they work so that you can make the best choice for your financial situation.
Direct Subsidized Loans
Direct Subsidized Loans are available to students with financial needs. This means they are awarded based on the student’s FAFSA, not their credit history. The federal government pays the interest while you are in school and for six months after you graduate or drop below half-time enrollment.
Suppose your parent(s) have an income below $23,000 and the other requirements are met for “Independent Student Without Dependent Children” status. In that case, you may also be eligible for additional funds under this program.
Direct Unsubsidized Loans
The Unsubsidized Direct Loan is a great choice for students who need more money than the Federal Stafford Loans can provide. This loan may be used to pay tuition and fees at any eligible school, as well as living expenses while you’re studying.
Since the government doesn’t pay interest while you’re in school (as it is with subsidized loans), this can be an excellent option if your degree program requires you to take out many loans throughout your undergraduate career.
Direct PLUS Loans
Direct PLUS Loans are available to parents and graduate and professional students. If you’re a parent borrower, you can borrow up to the full cost of attendance at your child’s school minus other financial aid he or she receives. A credit check isn’t required for this type of loan.
You’ll need to be able to prove that your income is within set limits based on the number of people in your household and where you live, but there are some exceptions depending on circumstances such as disability or if you’re on active duty with the military.
Direct Consolidation Loans
Consolidation loans are a type of federal student loan that allows you to combine all of your eligible federal student loans into one loan. The benefits of doing this include the following:
- A fixed interest rate and payment for the life of the loan (the amount you’ll pay each month is determined by how much money is borrowed).
- No origination fees, which are sometimes charged with other types of federal loans.
- More flexibility in choosing repayment plans, including income-driven and forbearance options, if you get behind on payments or want to pause payments for a short period.
In this article, they’ve covered the types of federal student loans available to students and prospective borrowers. These loans are a great way to finance your college education, but it’s important to note that there are many other options as well.
You may want to consider whether student loan refinancing could help you save money on interest payments or consolidate credit card debt into one lower payment each month. If so, contact its experts today!
