If you need an educational loan, it is best to start with federal student loans. Private loans can help, but only after you have lent everything you can to government programs. Below, we will discuss in detail how you use the use of federal student loans.
Qualifications for loans
One of the major benefits of federal student loans is that they qualify easily. Banks do not want to give you money unless they are sure they will give you money back.
As a result, you usually need to qualify by having enough income and credit (which most young students do not have). Federal student loans are different – you can qualify for specific loans without any credit or income checks.
Repayment of Federal Student Loans
Another advantage of government loans is the flexibility you get when repaying. You may be able to choose an extended repayment (which costs more than interest but results in lower monthly payments) or a payment that changes when you change your income (meaning you pay less when your income is less).
Federal loans also allow you to stop repayment under certain conditions such as unemployment. Skipping payments can lead to higher living expenses (if the interest rate continues based on your loan), but it can make it easier to go through some difficult points.
Private loans may offer some flexibility, but private lenders are generally less suited.
Any options you will have will be listed in your loan agreement; each lender is different so you will need to do extra homework and close reading to understand your options.
Federal student loans, on the other hand, are well documented and you can find answers and insights from a variety of sources. To simplify and reduce the number of loans you have, federal loans can be consolidated (which is not always a good option).
Private student loans usually need to be refinanced instead.
The main appeal of some federal loans is that your interest costs can be subsidized. In that case, the government pays your interest, so you don’t have to go out with cash (or add that interest to your loan – which would mean more debt to pay back the way).
Interest rates on federal student loans may be lower than the rates you will find on private student loans. Federal loans are offered or guaranteed by the government, which means that the nation of taxpayers will pay the bill if you fail to pay.
Depending on your total loans and interest rates, federal loans could cost more or less – be sure to compare both types and look for variable APR loans. Please note that there are interest rates or maximums that will keep federal student loans available in high-interest rate environments.
Interest rates are also fixed. This helps you plan and budget, and fixed interest rates will help if interest rates accelerate over the years during which you repay the loan.
Federal Student Recovery Loan
Federal student loans can be forgiven in many ways; the loan becomes “free money” that you do not need to repay.
It’s not current or easily qualifies for forgiveness or loan forgiveness, but it’s nice to have that as an option – and generally not available with private student loans.
You might qualify for forgiveness student loans as a result of your job. Public service employees can benefit from forgiveness after many years of service. For federal student loan prosperity, public service includes (among other things) the following:
- Government Employees
- Teachers in public schools
- Certain nonprofit employees
You can find out more about loan forgiveness on the Ministry of Education website.
Credits can also be disbursed upon student death. While most personal (single) loans go away when the credit user dies, Good Finance loans are unique: with a Good Finance loan, the parent is the borrower, but the loan can be forgiven if the child dies.
No parent wants to benefit from this, but it is a useful feature that can ease the financial burden of a grieving family
Various government loan programs
Keep in mind that loan programs vary, and the rules change over time. Find out what program your loans are a part of, and find out about the compromises that are most important to you.
Although you are almost always better off with some kind of government loan, you may need to consolidate certain loans under the umbrella of a Good Finance to qualify for some of the benefits listed above.
For example, certain public service employees only qualify for Good Finance loan forgiveness, while some teachers may benefit from any program.