The Best Federal Student Loans for Your Education and How to Apply for Them
When you shop around for the best student loan for your education, look for those that offer a low-interest rate. That’s a no-brainer, of course. You’ll also want to consider those with borrower protections and multiple repayment options. Federal direct loans are a great starting place for loan shopping with these requirements.
Federal Loans
The good thing about federal loans is that they have fixed interest rates which are most likely lower than private loans. Federal loans are more forgiving, too, in that they offer opportunities for loan forgiveness and they include income-driven repayment.
The three types of federal loans are:
- Direct PLUS Loans
- Direct Subsidized Loans
- Direct Unsubsidized Loans
Direct PLUS loans are for graduate students. These loans are unsubsidized, have higher interest rates, and are credit-based.
Direct Subsidized Loans are interest-free while you’re attending school. The payments are required 6 months after you’ve graduated. These loans are for needy students.
Unlike direct subsidized loans, Direct Unsubsidized loans are not based on financial need. You do have to pay interest on these loans; however, you can defer payments until 6 months after you graduate.
Applying for a Federal Loan
It’s fairly easy to apply for a federal loan. Simply go to studentaid.gov and fill out the Free Application for Federal Student Aid (FAFSA) each year to be eligible for these loans. The federal government will then send your FAFSA to the schools to which you applied. The financial aid office of each college or university will decide what your aid package covers. If approved, they will send you a financial aid award letter. The award letter contains helpful information about scholarships, free grants, work-study, and loans to which you may be eligible.
It’s a good idea to borrow what would keep your monthly payments at about 10% of your monthly income after graduation. Check out the numerous student loan calculators online to help you estimate loan payments.
