There are three types of federal student loans. The two most common are subsidized loans and unsubsidized loans. The interest on a subsidized loan is paid by the government while the student is attending school or within the grace period. The interest on a unsubsidized loan is built up while the student is either attending school or during the grace period and is then owed by the student. The third type of loan is the PLUS loan. This loan is actually taken out by the parents of the college student, and repayment begins 6 months after the loan money is received.
Federal student loans are easy to apply for and to be approved for. They are low interest loans and repayment doesn't begin for 6 to 9 months after you leave college. If you are unemployed immediately following school, you can also apply for an extension on your grace period. This will give you an additional 6 to 9 months to begin repayment. The monthly payments are generally low and the loan can be paid off of the course of 10 years.
To apply for a federal student loan, you need to fill out the Free Application for Federal Student Aid (FAFSA). The application can be filled out and submitted online. The deadline for the application is June 30th each year. If you are still a dependent, your parents will have to submit their tax information. If you are an independent student living on your own or returning to school, you can supply your own tax information. Like grants, federal student loans are based on income. Only low-income students are eligible for subsidized loans.
There is a limited to how much a student can borrow in subsidized loans. It is possible that a student can receive the max amount and then have to supplement with an unsubsidized loan in order to pay the full tuition amount.
Not paying back a federal student loan has huge consequences, including the potential of having your wages garnished and your tax returns withheld. You are also at risk of being sued. Federal student loans are also not eligible to be including in a bankruptcy.