The Department of Education is not only responsible for funding the programs that are implemented by the executive branch. The federal government is also in charge of funding the student loans that go to college students. Because of these two branches merging, many have speculated that the funding of higher education student loans is about to undergo a sea change. What does this mean to borrowers? It means that if you wish to avail of a federal student loan, the process might be changing.
Most people are aware of the fact that before a person can avail of the federal Student Loan Help, he or she must meet the eligibility criteria. These criteria are determined by the Federal Family Education Loan (FFEL) Program. Out of the hundreds of thousands of individuals who apply for financial help, the eligibility standards for receiving Student loans are strict. People wishing to avail of these loans must have an individual income that is sufficient enough to support his or her dependents. In addition, people with a low credit score and people who have not passed the necessary background check can also apply for the program, but they will not be given the same benefits as people who passed the initial screening.
A lot of students are aware that they are eligible for one of the popular federal student loans, the FFEL. They have also learned that if they wish to take out another student loan, it will most likely come via another popular federal loan, the Direct Plan. However, despite their knowledge, many still prefer to avail of the original DEEP, or the Federal Educational Exchange (FEEP) student loans. Why? Below are the main reasons why.
One of the biggest reasons why people still opt to take out other federal loans is because they fear that opting for a DEEP education student loan might not be backed by a federal guarantee. Indeed, a lot of state-funded institutions participate in the DEEP program. Most of them do, so you will not be left out of the guarantee, even if your college has not yet become fully funded. The guarantee on these loans also applies to private for-profit colleges, although their tuition rates are usually higher than those offered by public universities.
Another reason why students still opt to take out other federal loans is because they believe that they would have a hard time getting a Pell Grant, the one type of education student loan which does not have to be paid back. It is true that the government offers a maximum grant award per student per year. But even if the Pell Grant is higher perks than those offered by other loans, such as the DEEP or FEEP loans, still many would find it difficult to pay them back. In most cases, a Pell Grant is a gift, and its value is bound to diminish over time.
Federal student loans are structured in a way that makes them very easy to repay. The repayment schedule begins with the first year in which payments are made; payments may be deferred until the borrower finishes his or her degree program, or in some cases up to a certain number of years after graduation. In addition, interest can be deferred, meaning that it can be borrowed against at a later date; this interest rate is typically below the standard interest rate applied to federal student loans. In general, federal education department loans offer the best repayment terms.
Private for-profit colleges also participate in the education department’s loan repayment plans. There are two types of repayment plans offered by these schools: standard direct unsubsidized and preferred indirect unsubsidized. Standard direct unsubsidized loans feature a lower interest rate and a longer repayment period; however, they do not feature an interest rate that is set by the federal government. Preferred indirect unsubsidized loans feature a lower interest rate than standard direct unsubsidized loans, but they do not feature a repayment period that is set by the federal government.
Both types of Direct Student Loan programs offer a choice of interest rates that can either be fixed or variable. The Federal Direct Loan program features a fixed interest rate, while all the private loans feature a variable interest rate. Students who wish to borrow money to pay for college need to take time to compare the different programs and choose the one that is right for them. No matter what the type of student loan, students need to know how much they will be paying back so that they can plan out their finances carefully and not put themselves in a financial bind once graduation arrives.