Department of Education Student Loans

department of education loansA college degree has never been more important for students seeking professional careers, but unfortunately, the cost of college is extremely high and continues to rise, making such an education unattainable for many. In an effort to make higher education more accessible, the federal government has taken initiatives to make more federal aid money available to students with financial need.

Each year, the Department of Education provides more than $80 billion to students in the form of grants, funding for work-study programs, and Department of Education student loans. That $80b figure makes Department of Education student loans the largest form of student aid in the country. The role of Department of Education student loans is to enable students with financial constraints to pursue higher education.

Benefits of Department of Education Student Loans

Department of Education student loans offer a series of benefits to student borrowers that are endemic to federal loans. Federal student loans offered through the Department of Education have lower interest rates than nearly all private student loans, and have very favorable repayment terms. Federal loans offer fixed interest rates, and on many, repayment does not begin until six months after graduation or when the student drops below full-time status in school. Additionally, some Department of Education student loans, such as Stafford Loans, can be subsidized, meaning the federal government pays any interest accrued on the loan while the student is enrolled.  Department of Education student loans can ease the financial pressure while the student is in school, and they can also cover living expenses.

Types of Department of Education Student Loans

The Department of Education has a variety of loans available for students wishing to pursue their college education. There are three main types of loans from the Department of Education: Stafford Loans, PLUS Loans, and Perkins Loans. Stafford Loans are one of the most common and low-cost methods of federal aid: these loans are low interest, fixed-rate loans for students attending college at least on a part-time basis. Subsidized Stafford Loans currently offer an interest rate of 3.86%, and the government pays the interest that accrues while the student is in school. Unsubsidized Stafford Loans currently have a fixed interest rate of 5.41%. PLUS Loans currently have a low fixed-interest rate of 6.41%, and can be obtained regardless of financial need. Perkins Loans are awarded on the basis of extreme financial need, are subsidized, and have a fixed interest rate of 5%.

Changes in Department of Education Student Loans

As a result of legislation passed by Congress and signed by President Obama in July of 2010, all federal loans are disbursed directly through the Department of Education. This means that the funds for federal student loans are no longer offered through third-party banks, but that the funds come directly from the Department of Education. Students may apply for Department of Education student loans using the standard FAFSA, which is available online. Remember, if you need money for college, look for scholarships and grants first, then pursue Department of Education student loans first, and if you still need money, explore private student loan options as a final measure.

 

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