Advantages of Federal Student Loans
When Looking for a Student Loan. Federal Student Loans
When you consider taking an education loan, start with federal loans. The following advantages federal student loans have over private ones make the first ones more preferable. Knowing these advantages you’d find it wise to turn to private loans only after you’ve used every benefit government programs provide.
Loan qualification. This is one of the major advantages of federal student programs. While banks would lend only on the condition that the borrower is trustworthy (i.e. they have credit history and sufficient income), federal student loans are much easier to qualify for. Some of federal student loans run no income or credit check.
Loan repayment. With government loans you get a lot of flexibility with repayment. It offers two options: extended repayment, with lower monthly payments and higher costs of interest in the end, and a repayment model that adjusts to the changes of your income (you pay more when your income is higher and less when it is lower). In case of unemployment and under certain other condition federal loans allow to pause repayment. Though skipping of payments may bring to higher lifetime costs (with interest continuing to build on your loan balance), this condition will make it easier for you to go through the tough time.
Private loans, though offering some flexibility, are less accommodating as a rule. Anyway, with every private lender you will have to do some close reading to understand all your options, while with federal student loans your options are well-documented and easily accessible.
Interest rates. Federal loans charge lower interest rates, since these loans are guaranteed by the government. This means that if you fail to repay your loan, taxpayers will foot your bill. Fixed interest rates federal loans offer are also a great advantage: you can plan your budget and know that no matter how high interest rates skyrocket all around, yours are not going to change.
Loan forgiveness. There are several ways federal student loans can be forgiven and become “free money” you will not need to repay. For instance, student loan forgiveness can be obtained through your job. Certain number of years, served in such public service establishments as governmentс, public schools, certain non-profit organizations and some others, may make you eligible for loan forgiveness. Though it will take time and effort to qualify for this kind of loan discharge or forgiveness, but it is still great to know that you have this opportunity, which private student loans lack.
