The U.S. Department of Education's Direct Loan Program remains the largest resource in providing funding for post-secondary education. As lender, it has set the terms of its loans, eligibility requirements and repayment options. Although there are many private funding sources available, government student loans offer low interest loans you can apply for online. Securing and managing these loans are relatively simple and convenient; and when it comes time to pay, you will be given a considerable amount of flexibility.
Federal Perkins Loans are granted to full time and part time undergraduate, graduate and professional school students based on financial need. It offers a fixed interest rate of 5 percent. Borrowers can get up to $5,500 per year for undergraduate and up to $8,000 per year for graduate school. Stafford Loans are granted to full time and part time undergraduate, graduate and professional school students. There are two types of Stafford Loans: (1) subsidized and (2) unsubsidized. Subsidized Stafford Loans are based on financial need. The government will pay any interest accrued. Conversely, Unsubsidized Stafford Loans are not based on financial need and borrowers are responsible for any interest accrued. The loan amount can range from $2,625 to $8,500 annually and will depend on what year you are in, whether you are in an undergraduate or graduate program and whether you are a dependent or independent student. Interest rates are fixed at 8.5 percent. Direct Plus Loans are granted to the parents of dependent students enrolled in an undergraduate program. Direct Consolidation loans allow eligible loans to be consolidated into one single loan program with one monthly payment.
To be eligible to receive a government student loan, a students must: (1) be a U.S. citizen or eligible non-citizen; (2) be registered with the Selective Service if a male between the ages of 15 and 25; (3) have a valid social security number; (4) be enrolled at least part time; (5) have a high school diploma or GED and (6) must not be in default on any federal issued student loans or education grant. Subsidized Stafford Loans additionally require a financial need for assistance and that the school is a Federal Family Education Loan Program participant.
The first step in obtaining a Government student Loan is applying for PIN and completing the FAFSA application. You will need your social security number, W-2 forms and 2008 Federal Income Tax Return. If you are applying as a dependent, you must also provide the requested documentation for your parents. If you are married you must provide your spouse's Federal Income Tax Return. You should also have any records for untaxed income such as child support, your current bank statements and alien registration number if you are not a U.S. citizen.
After you complete the online application, you will receive your Student Aid Report (SAR) which summarizes the information contained in your FAFSA application. Your SAR will also include your Expected Family Contribution (EFC) and pin number used to sign your application and access your records. You must review your SAR carefully. Schools will use your SAR to determine eligibility in a similar way credit reports are used before extending credit. Once you have been approved for financial aid, you will receive an award letter that includes the amount you are eligible to receive. You will be asked to sign and return the award letter.
Upon completion of your program, you will receive your repayment schedule including the monthly payment amount, number of payments and when your first payment is due. Based on your circumstances you may be eligible to apply for a deferment or forbearance. A deferment will stop payments for a certain period of time. The forbearance is temporary reduction or postponement in payments usually for those who do not meet qualifications of a deferment.