Benefits of Federal Student Loans: Why Federal Education Loans Help College Students

Federal student loans are available to college students who complete the Free Application for Federal Student Aid (FAFSA). This will give borrowers access to fixed rate, low interest loans. The most favorable rates are available to individuals with the lowest Expected Family Contributions (EFC). Whilst Perkins loans are means tested, Stafford loans are available to almost all American citizens.

Federal Student Loan Eligibility Criteria

  • Must be a U.S. citizens or an eligible non-citizen.
  • A valid social security number.
  • The applicant must have a high school diploma, General Education Development certificate or possess an equivalent certificate that has been issued by the U.S. Department of Education.
  • Must not have a drug conviction that was received when receiving federal student aid.

Low Federal Student Loan Interest Rates

Subsidized student loans are clearly the most affordable, but they do involve a means test. The Perkins loan has an interest rate of just 5% (subject to change) and the subsidized Stafford loan rate is 5.6% (subject to change). However, even the unsubsidized Stafford loan charges just 6.8% which is considerably more affordable than any of the private sector alternatives.

No Credit Check Student Loans

Individuals who don’t have a credit history or have impaired their credit due to missed and late payments will have fewer options available. The good news is that federal education loans do not involve a credit check. This means that they are suitable for anyone. Student bank loans always involve a credit check so the only way that an individual would be able to borrow money is with a cosigner.

Repayment Flexibility

Federal student loans offer a grace period of 6 months after graduation. Following that, repayments are typically made over a period of 10 years. However, this is not set in stone and can be varied by the student. There are also more options should someone experience financial problems.

Student Loan Forgiveness Programs

This is a particularly important consideration for any individual who plans to work in certain public sector occupations, such as teaching, nursing or the armed forces. A student loan forgiveness program allows that individual to reduce the amount owed by serving the local community. Up to 100% of the debt can be cleared so it is important to investigate how this works before signing up to a student bank loan.
The benefits of federal student loans are considerable, especially for those who qualify for a subsidized deal or student loan forgiveness program following graduation. Interest rates are considerably lower and there are more options when paying off student loans.