A number of students take out government student loans to finance their education cost when they’re not able to afford it. These loans are usually offered at comparatively low interest rates and extended terms of repayment.
Types of government student loans
There are 3 types of government student loans that are discussed below.
• Stafford loan
Stafford loans are one of the most popular government loan programs. Both college and university students can take out such a loan to supplement scholarships and grants. You can take out a subsidized or an unsubsidized Stafford loan. Subsidized Stafford loans are need-based and are guaranteed by the federal government. Whereas, unsubsidized loans are not exclusive for the low income people; so, the borrowers are responsible to make the payments as soon as they borrow the required amount. The maximum amount that a student can take out is $20,500 per year depending on the degree status and the remaining years in the institution.
• PLUS loan
Parents of dependent students can take out PLUS (Parent Loans for Undergraduate Students) loans to finance their child’s education. The graduate as well as professional degree students can also apply for such loan. The terms and conditions to take out such loans are somewhat similar. However, students taking out such loans are required to compete the FAFSA (Free Application for Federal Student Aid) in order to receive a PLUS loan. Moreover, the institution should determine your maximum eligibility for Stafford (both subsidized and unsubsidized) loans before offering you a PLUS loan. The yearly maximum limit (regardless of whether it is Parent PLUS loan or a Student PLUS loan) on PLUS loans equal to the cost of your attendance minus any other financial aid you have.
• Perkins loan
Perkins Loans are available to both undergraduate and graduate students with an exceptional financial need. Unlike PLUS loans and Stafford loans, Perkins loans are offered through the financial aid office of the school. Though the loan is made with government funds, yet the school is actually the lender. So, the borrower has to pay back the loan to the school. The school can pay you the amount either through check or apply the funds towards paying off your school charges. Depending on the need of the borrower, the maximum limit one can borrow is $4000 and $8000 for each year of undergraduate and professional study, respectively.
It is advisable that before applying for government student loans, you should estimate how much you need to borrow. While doing this, take into consideration your tuition fees along with your other costs such as, books, transportation, etc. It is also quite important to plan a budget so that you can complete your education with the help of financial grants and student loans without incurring any additional debt.