Subsidized and unsubsidized federal student loans are available. Subsidized student loans are available to those who demonstrate financial necessity. Even though interest must be repaid on both forms of loans, the government contributes towards the loan repayments on subsidized loans. Grad students can borrow more than undergrads do. National student loan interest rates are typically lower than those offered by private lenders.
Can I Get A Direct Loan From The Federal Government?
Undergraduates with a demonstrated financial need are the only ones eligible for direct subsidized loans. Direct unsubsidized loans are available to undergraduates and graduate students, and there are no need-based eligibility criteria. The government covers interest on a subsidized loan as long as the borrower is enrolled at least half-time in an eligible educational institution and for an additional six months after graduation. During a deferment period, the government would also cover the cost of your loan payments.
Find Out How Much Money You Can Get
There are annual restrictions on how much can be borrowed through either the subsidized or unsubsidized Federal Direct Loan Program. The total amount that can be borrowed is also capped.
College Freshmen
If you are still living at home with your parents and are a first-year college student, you can borrow up to $5,500 between subsidized and unsubsidized loans. A maximum of $3,500 can come from a government-backed loan program. For the first year of college, financially independent students whose parents do not qualify under Direct PLUS loans typically borrow up to $9,500. There is a cap of $3,500 on subsidized loan amounts. Each year of continued enrollment is met with a higher borrowing cap.
Those Who Have Completed Their Graduate Work
Direct loan eligibility for professionals and graduate students is limited to $65,500, with a maximum loan amount of $138,500. However, graduates and professional students can now only apply for unsubsidized loans (beginning in 2012).
People Who Are Taking Out a Loan for the First Time
For individuals who qualify on July 1, 2013, and July 1, 2021, the maximum number of college years for which they can obtain direct subsidized loans is five. The maximum duration of your program's eligibility term is 150% of the official duration. If you're planning on getting a bachelor's degree, you can only get direct subsidized loans for six years. For unsubsidized loans made directly, there is no cap.
The Cost of Interest on Loans, Subsidized and Otherwise
Unlike private lenders, who may charge consumers another double annual percentage rate, government loan interest rates are typically in the single digits (APR). Undergraduates who receive a Direct Subsidized or Unsubsidized Loan on or following July 1, 2021, but before the start of the 2022-23 academic year will pay an annual percentage rate (APR) of 3.73%. A graduate or working student might expect an annual rate (APR) of 5.28% for an unsubsidized loan.
How to Pay Back Federal Student Aid
When you begin making loan repayments, you will have numerous opportunities to choose from. You will be enrolled in the Conventional Repayment Plan unless you request an alternative plan from your lender. Payments under this plan are spread out over a maximum of 10 years, with no more than one due each month.
Structured Repayment Program
If you opt for something like the Gradual Repayment Plan, your monthly payments will be reduced first and gradually increase over time. This plan also includes approximately ten years, but it costs more than the Standard choice due to how payments are structured. There are also several income-based repayment plans available for students who prefer to pay back their loans on a more manageable monthly basis.
Disbursement Scheduled According To Income
Payments under income-based repayment are capped at 10% to 15% of disposable income each month, and the repayment period is extended to 20 or 25 years. It's possible that your monthly payment could be reduced if you enrolled in an income-driven plan. But keep in mind that the more time you need to pay back your loans, therefore more interest you will end up paying. If the plan allows, you may have to include any loan forgiveness you receive as part of your taxable income.
Conclusion
There are two kinds of federal student loans: subsidized and unsubsidized. The government would subsidize interest upon student loans for those who demonstrate financial necessity. Interest is paid on both loans, but the federal government partially repays the principle of subsidized loans. The borrowing limits for a graduate student are higher than those for an undergraduate.
