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 | | | | | | If you have questions like what is the difference between (FFEL) and (EFC) or subsidized and unsubsidized the Loan Glossary will explain the terms. The Federal programs are also listed below. Good Luck! |
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Federal Family Education Loan Program (FFEL)
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The FFEL is a governmental program that provides both insurance and subsidies to banks and private companies, allowing them to lend students money for college. Basically, the government is your co-signer, backing your success to re-pay the student loan. If the loan is not paid back, your credit score will suffer, income can be garnished and your tax refund checks will be taken. Your school will either have these types of loans available through the Federal Government, or it will have the William D. Ford Direct Loan Program listed below. It cannot have both programs. The FFEL Program is considered a Title IV loan. The difference between these two loans is: 1) the interest rates 2) borrowing from the private banks or lenders backed by the Federal Government or by the U.S. Department of Education itself.
- Federal Stafford Loan Program
a. Subsidized
b. Unsubsidized
- Federal Plus Loans - PLUS - Parent Loan for Undergraduate Student
- Federal Consolidation Loans
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1. Federal Stafford Loan Program
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The most common type of loan, as this loan is not based on extreme financial need. What will be based on need is if the Stafford loan will be subsidized or unsubsidized. Anyone can apply and receive this type of loan money for college. Stafford loan borrowers will be charged fees, which cannot exceed 4% of the borrowed amount. The amount of interest will vary from year to year on the Stafford loan, but will never exceed 8.25%. Normally, 10 years are given to repay the loan and as of July 1, 2006 the interest rate on the Stafford Loan is 6.8%. You can receive both a subsidized and unsubsidized Stafford Loan for the same academic year. The maximum yearly amount borrowed through each program varies per individual. Depending on if you are a first-year student, a dependant student or independent student, the amount a student can borrow will increase.
Subsidized - With a subsidized loan, the interest begins to accrue six months after you leave school (or stop attending.) That means the government picks up the tab on the interest for your loan as you move through school. As with most other loans, whether you get the subsidized student loan depends in the financial need you show through your Estimated Financial Contribution, calculated by the Federal Government.
Unsubsidized - The unsubsidized loan is a loan not based on need. You will pay interest from the time the loan is given until it’s paid in full. If you choose not to pay the interest on this loan as you move through school, it will be added to the principle of your loan and additional interest will be based on the amount plus the interest.
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2. Federal Plus Loans
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The Federal Plus Loan allows parents and guardians to help pay their child’s education. All plus loans are unsubsidized and not based on need. There are no credit checks required for this type of PLUS loan. The interest rate is a fixed interest rate of 8.5% and may not exceed 9%. The same fees, as with the Stafford loan, apply to the PLUS loans and interest on the PLUS loans begins to accrue 60 days after the loan is disbursed. There is a 10-year repayment given on this loan and it cannot be transferred into the child’s name after graduation. If the student receives $8,000 in loans through the Stafford Loan Program, and the total cost of college is $10,000, the parent may borrow the remaining $2,000 though the PLUS loans program. The lender of this loan will send the money directly to the school and if there is any money left over, the parents who took out the loan will be issued a check for the remaining money.
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3. Federal Consolidation Loan
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This type of loan is one that is funded by private banks or for-profit organizations, combining multiple types of Title IV student loans into one distinct loan with one monthly payment, with a new payment schedule and a fixed interest rate. One is entitled to loan consolidation as long as they are a U.S citizen and have Federal Loans totaling more than $10,000.
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