Federal Student Loans

Federal student loans in the US are granted and authorized under Title IV of the Higher Education Act as amended. These loans are entitled to college and university students via funds given directly to the school and universities and are used to supplement and backup personal and family resources, grants scholarships,, and work-study. They are subsidized by the U.S. Government and also may be unsubsidized depending on the student's financial status and need. The U.S. Department of Education published a guidelines or a booklet comparing federal loans versus private loans. In this same document, the government discus what you may use the loan for:

You may use your loaned money only to pay for education expenses and other school needs. At the school that awarded your loan. Education expenses include school charges such as room and board; tuition; fees; books; supplies; equipment; dependent transportation; childcare expenses; and rental or purchase of a personal computer.

Both subsidized and unsubsidized loans are guaranteed by the U.S. Government headed by the U.S. Department of Education either directly or through agencies. Nearly all students are entitled and eligible to receive federal loans this is regardless of credit score or other monetary issues. Both types offer a grace period of 6 months, which means that no payment due until 6 months after the student's graduation or after the borrower becomes a less than half time student, did not graduate. Both types have a fairly annual limit. The dependent undergraduate limit effective for loans disregarded on or after July 1, 2008 is as follows combined subsidized and unsubsidized limits: $5,500 per year for first timers or freshman undergraduate students, $6,500 for second year or sophomore undergraduates, and $7,500 per year for junior and senior students that is undergraduate, as well as students enrolled and qualified in teacher preparatory or certification coursework for graduate programs. For independent or solo undergraduates, the limits combined unsubsidized and subsidized effective for loans disbursed on or after July 1, 2008 are larger: $9,500 per year for first year undergraduate students, $10,500 for second year undergraduates, and $12,500 per year for third and fourth year undergraduate students, as well as students enrolled in teacher preparatory or certification coursework for graduate programs. Subsidized federal student loans are only given or offered to students with a demonstrated financial need. Financial need may differ from school to school. For these loans, the government makes interest payments while the student is in college. For example, those who loaned $10,000 during college will owe $10,000 upon his or her graduation.

Unsubsidized federal student credits or loans are also guaranteed by the U.S. Government, but the government will not pay interest for the said student, rather the interest accrues during his or her college years. Nearly all students are entitled and eligible for these loans regardless of financial need. Those who borrow $10,000 during his collegiate years will owe $10,000 plus interest upon his or her graduation. For example, those who have loaned $10,000 and had $2,000 accrue in interest this means he or she will owe $12,000. Interest will begin on the $12,000. The accrued interest will be capitalized into the loan price, and the student will begin making payments on the accumulated total. Students can select to pay the interest while still studying in college; however, few students select to exercise this option.

Federal student loans for graduate students have much higher limits: $8,500 for subsidized Stafford Loan and $12,500 limits may differ for certain courses or field of study for unsubsidized Stafford Loan. Many students also select or take advantage of the Federal Perkins Loan. For graduate students the limit for Perkins Loan is $6,000 per year.