Your Guide to Federal Student Loans

Your Guide to Federal Student Loans

What are federal student loans? How do they differ from grants or private loans? Do you qualify for assistance? As you approach your freshman year of college, you’re trying to juggle your academic load, your extracurricular activities, and your college applications. While that seems like a large enough workload for anyone, it’s not all you have to worry about. You also have to figure out how you are going to pay for your tuition, room and board, supplies, and other fees. That means answering these questions and a few others.

With tuition for public and private colleges and universities reaching $30,000 to $50,000 per year, the days of working your way through college with a part-time job are long gone. Even if your parents have been saving money for your college fund from the day you were born, you are most likely going to need some form of financial aid to afford your education.

Different Types of Federal Financial Aid

First of all, as you start to navigate the world of financial aid, you should know that all federal student loans and grants are awarded based on financial need. If you can demonstrate sufficient financial need, you may be eligible for a Pell grant or FSEOG (Federal Supplemental Educational Opportunities Grant). These grants differ from federal student loans in that you’ll never have to pay them back after you graduate.

Even if you do not meet the financial need requirements for a government grant for your education, you may still be eligible for a great deal of assistance through federal student loans. Federal student loans differ from private student loans in a number of ways and are generally a lot more beneficial if you qualify for them.

For example, if you have sufficient financial need, you’ll qualify for a subsidized loan. This means the government will actually pay the interest on your loan as long as you are enrolled in school. Your loan will also be subsidized through the six-month grace period between graduation and your first loan payment. You won’t find this kind of deal with a private loan.

When you apply for federal student loans, you will find that you may qualify for one or more of three types of loans: subsidized or unsubsidized direct loans (also called Stafford loans), PLUS loans, and Perkins loans. Direct loans are awarded to most undergraduate students, while PLUS loans are generally reserved for graduate students and to parents of dependent undergraduate students. Perkins loans are actually funded by your school through a program with the federal government, and not all schools participate.

Interest Rates on Federal Student Loans

Unlike private loans, federal student loans have interest rate caps to protect you. Unsubsidized direct loans are capped at 6%, while subsidized loans are capped at 6.8%. Perkins loans are capped at an attractive 5%.

Though you will be borrowing money from the federal government, you have options for your loans. We highly recommend shopping around if you’re going with a bank-issued federal student loan because you might be able to find a reduced interest rate or other benefits.

Do read the fine print, as some benefits disappear if you miss a payment or even if you’re just a little bit late with a payment. We all know that the months (and years) after you graduate from college can be uncertain financially, and you don’t want to trap yourself in a loan that will punish you if you hit financial hardship.

Financial Hardship, Loan Forgiveness, and Other Benefits of Federal Loans

That said, federal loans offer you a lot of options that private loans do not if you find yourself out of work or otherwise experiencing financial hardship. For example, you may be able to suspend your payments for a few months while you get back on your feet, or you may be able to tie the amount you pay to your income so that you aren’t overburdened.

Public service can also offer you loan forgiveness with some federal loans. And these are just a couple of the ways the federal government will work with you to ease your financial stress and help you pay back your loans.

Start With a FAFSA

So, how will you know if you’re eligible for grants or federal loans? There’s just one application for federal financial aid, so you don’t have to submit multiple applications for grants, loans, etc.

Applying for financial aid is easy. Just go online and fill out a FAFSA (Free Application for Federal Student Aid). Several sets of algorithms will be applied to the income and tax information you supply for yourself and your parents (if you’re a dependent student) to determine what kind of aid you qualify for and how much. Then, once you receive your aid package, you can determine whether or not you’ll need to supplement your grants and/or federal student loans with any private loans.

Compare and Apply for Student Loans works hand-in-hand with the best, most trusted names in private student lending to help students and their families find the money they need for college. Through use of comparison tools and loan searches, TuitionChart provides over 20 different loan options for students. is designed to help students and their families wend their way through the maze of financial aid information.