Federal Student Loans For College: What You Need To Reach Your Goals

graduate flashing currency for federal student loans for college

A Guide on Federal Student Loans for College

Think you’ll need to be applying for federal student loans to make it through college? You’re not alone. So what are the best ways to finance your education aspirations?  Your first stop should be federal student loans for college entrants that are looking for one stop student loan shopping.

About two-thirds of college students take out loans to pay for their education.

book glasses and yellow highlighter

While we all want to get an education while avoiding debt, it’s unfortunately impossible for the average person to pay for school out of pocket. The increasing cost of education, which has skyrocketed, combined with growing living costs mean that student loans will become an even more popular choice for financing.

Fortunately, the federal government has put together a package of federal student loans for college that are available to just about every aspiring student.

To help you navigate these financing options, we’ve put together a guide to loans for college including:

  • Stafford Loans,
  • Perkins Loans, and
  • PLUS Loans

Ready to get started?

Stafford Loans

Stafford loans are the most common type of loans for college students. They also have very simple requirements apply for a Stafford loan : you only need to reach half-time enrollment to apply for the loan and you need to be in a certificate or degree program.

graduation cap and tassle

These federal student loans for college come in two forms: subsidized and unsubsidized.

Subsidized Stafford Loans

The Basics:

  • Income dependent
  • No credit check required
  • Limited payment distribution
  • No interest accrued while in school except in specific circumstances

Subsidized loans are provided to students whose parents make less than $50,000 a year or who are financially independent of their parents (their parents don’t claim them as dependents on their taxes).

A subsidized Stafford loan is limited according to your year in school:

  • Freshmen – $3,500 loan
  • Sophomore – $4,500 loan
  • Junior – $5,500
  • Senior – $5,500

The biggest difference between subsidized loans and unsubsidized loans is interest. If you qualify for a subsidized loan, the government pays the interest on the amount you borrow until you graduate, saving you thousands of dollars over several years.

There’s also a limit on the total amount borrowed: you’re limited to $23,000 in subsidized Stafford loans for college across your studies.

books and pencils stacked in study

There are a few things to note:

If you qualify for subsidized loans because of a family financial emergency or because of a low paid job but your family income grows, you’ll owe the interest on loans taken out from the year you’re no longer eligible.

If you no longer qualify for subsidized loans and don’t graduate from the program you started under the program, then you’ll begin to pay interest on your balance.

You will not accrue interest on the principal of your federal student loans for college during your time in school if you:

  • Lose eligibility and drop out of the program
  • Enroll in a graduate program
  • Get your diploma and start a new undergraduate program
  • Graduate and start a teacher’s certification program
  • Graduate and begin the preparatory coursework for a graduate program

Remember, you’ll reapply for FAFSA every year, so if your student loans for college status changes, you’ll be updated before a new school year begins.

Unsubsidized Stafford Loans

The Basics:

  • No credit check
  • Not income dependent
  • Interest accrues from the disbursement

Unsubsidized Stafford loans are available to students at both the undergraduate and graduate level regardless of income.

man and women graduates

Instead of placing limits on the loans outright, the government allows the school you’re enrolled in to determine the amount you’ll borrow. As a result, your school’s financial aid office makes this decision based on the cost of attendance and the other aid you’ve received, like scholarships and grants.

Unsubsidized loans begin accruing interest as soon as advanced.

It’s possible to apply for deferment or forbearance if you can’t pay the loans after you graduate. However, the interest will continue to grow regardless of whether you make payments.

Perkins Loans

The Basics:

  • Based on Financial need
  • Low-interest rate compared to other loans
  • School is the lender – not Department of Education
  • Not available at all schools and funds dependent on availability

Students with exceptional financial need who don’t cover their cost of attendance with scholarships and grants may be eligible for a Perkins loan.

Perkins loans are different from subsidized Stafford loans because they feature a fixed, low-interest rate and allow you to borrow more.

Students can borrow up to $5,500 per year with a total of $27,500 over the course of your undergraduate degree. Graduate students can borrow up to $60,000 in combination with what was borrowed during the undergraduate degree.

Perkins loans are tricky because they are controlled and dispersed by schools. Not all schools participate in the program, and not all eligible students will receive the maximum loan amount because of the availability of student loan funds.

PLUS Loans

The Basics:

  • Available to graduate students or parents of students
  • Contingent on credit check
  • Maximum loan limited to cost of attendance
  • Must pay both interest and a loan fee

PLUS loans were designed to help adults pay for school. They can be used to pay for graduate or professional degrees or certifications, but parents of undergraduates who claim their children as dependents can also take out these loans.

The PLUS loan is a credit dependent system where the U.S. Department of Education serves as the lender. In fact, PLUS loans are available for the cost of attendance minus other financial aid (federal loans, grants, scholarships) awarded.

female hands holding money

Your school determines how much you’ll need to borrow in PLUS student loans to make up the difference.

Securing a PLUS Loan with Bad Credit

PLUS loans require a credit check, and you may be denied if you have been the subject of severe credit events in the past. In fact, bankruptcies, high amounts of debt, or delinquencies count against you.

Although this sounds foreboding, the Department of Education is more forgiving than many big banks and private lenders. You can still qualify for a Direct PLUS loan even with bad credit if you:

  • Find a co-signer with good credit
  • Demonstrate that your bad credit was the result of extenuating circumstances

If you can do one or both of these things, you may still qualify for a PLUS student loan as long as you also go through mandatory PLUS credit counseling provided by the government. The counseling includes a learning session and a quiz. No need to travel; you’ll complete it on StudentLoans.gov.

Start Your Journey with Federal Student Loans For College

Federal loans are available for students who want to pay for college without relying on big banks and their uncompromising interest rates. These loans offer options for students and parents including those who have financial restrictions.

Will you be one of the millions of students taking applying for FAFSA this year? Share your questions and tips in the comments below.

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