student-loansSending your child to college or university is not an easy task. You should be emotionally and financially ready before they can take higher education.

The United States of America offers several federal student loans that surely help in order to send your children to a university. But, did you know the different federal student loans offered by the government? Did you know what would be its inclusions and benefits under that? Did you know the possible length and mode of payment? And are you also considering some student loans being offered by private universities?

Before we enumerate some of the federal and private student’s loan, I will discuss first the difference between them.

Paying the Loan

For federal, you will not ask to pay for your loan until you graduate or leave the school. On the other hand, many or almost all private loans are asked to pay while you are studying.

Interest of the Loan

The interest of the loan from the federal is actually fixed. It is lower than in the private. Usually, the interest of the private loans is more than 18% of the total amount. Private Student loan also has the right to increase the interest depending on the status of their organization.

Paying of Interest

Since private loans are subsidies, the borrower is the one responsible to pay the interest while the student is in school. While for those in the federal loan, the government is the one responsible for paying it.

Good Credit Score

If you are applying for a federal student’s loan, you don’t have to present a proof of good credit standing. Unlike in the private student’s loan, the lender will go to ask a good credit standing as a proof that you are able to pay the loan. The private lending will also base the total amount to be credited to you depending on your credit standing.

Cosigner/Co-maker

In a private loan, you need to have at least two cosigners. Unlike in the federal, they will not ask any cosigner for the approval of your loan.

Problems in Paying

If you have a problem paying your loan in federal, you can ask for a temporary postponement of your scheduled payment. If you are in the same situation under private loan company, unfortunately, you cannot ask for postponement nor extension of your scheduled payment.

Prepayment Penalty Fee

You can be assured that in all federal form loans, you don’t have to pay any prepayment penalty fees. While on the other hand, you need to check if the lender doesn’t ask you for that.

Benefits of Public Worker

It is one of the privileges of a public worker to lessen the amount to be paid in a federal loan. But, if you are in a private loan, it is impossible for the lender to give you any form of discount.

Types of Federal Student’s Loan Program

The Federal government has the task of providing quality higher education among all Americans. It is the duty of U.S. Department of Education to give assistance in form of student’s loan program to those who want to pursue a degree in any colleges and universities. The federal government serves as the lender. Usually, all loans from the government have low interest and easy to avail.

William D. Ford Federal Direct Loan Program (Direct Loans)

It is a low-interest loan for the students who want to pursue their college or university degree. The lender of this loan is the USA federal government rather than a bank or any financial institution. It includes direct and indirect subsidize a loan, direct plus loan for both parents and students, and direct consolidation loans.

The Federal Family Education Loan Program (FFELP) (Discontinued)

In this loan, private lenders apply for a federal loan for their client. The federal government did not directly transact with the borrower. The lenders are banks, financial institution, and other agencies. It is the lender’s right to accept or deny applicants. They have the sole responsibility for collecting the money and interest. But because of the Health Care Reconciliation, no FFELP loan is approved starting July of 2010.

Health Education Assistance Loan (HEAL) Program (Discontinued)

This loan is designed for the students who want to pursue a career related to health sciences. The lender of this loan is some private companies. The program doesn’t work anymore after 1998.

Federal Perkins Loan Program

This is a lower-interest loan. This loan is being managed by the school you want to enroll. However, the federal government directly manages all the colleges and universities. The amount that you can lend will be depending on your needs and the capacity of your school.

Private Student’s Loan.

These are loans that are funded by banks, private companies, and financial organization. All the guidelines for this kind of loan depend on the private lender. The federal government doesn’t have any control on it. Private loans have their own policies on approving and paying off the loan.