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Government College Loan

Receiving a college education may be the single most important accomplishment that one may achieve in their entire life time.

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A government college loan remains the most popular way for students to pay for college. The National Center for Education Statistics reports over 50% of college students take out a government college loan before they graduate. Even though private student loan debt has risen by 734% over the last decade, government backed loans remain standard. These loans can include Subsidized and Unsubsidized Stafford Loans, Perkins Loans, PLUS Loans, and Direct Loans. They may also include state funded loan programs, like College Access Loans. Government loans originate with lenders, such as Sallie Mae, who work with the federal government to provide low interest, low risk loans for college students who demonstrate financial need.

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Government college loan variations include:

• PLUS Loans
• Subsidized Stafford Loans
• Unsubsidized Stafford Loans
• Perkins Loans

Most of these loans require a borrower to fill out the Free Application for Federal Student Aid, or FAFSA, to determine eligibility for this type of financial aid. The student is then assigned an Estimated Family Contribution, or EFC, which delineates how much the student and parents ideally should pay towards college expenses. These loans all carry fixed interest rates below 9% and offer a wide variety of repayment options, including deferment for excessive financial hardship, graduated repayment, and choice consolidation options.

Each type of loan serves a different purpose. Perkins Loans help students who demonstrate excessive financial need by offering interest rates at 5%. PLUS Loans offer parents government backed loan money to help dependents pay for school. Subsidized Stafford Loans offer loans with an interest rate of 6.8% and do not collect interest until six months after the student graduates. Unsubsidized Stafford Loans collect interest while student attends school, but offer a six-month repayment grace period after the student leaves school. All of these loans fall under the heading of Direct Loans. There are two main government supported programs, the Federal Family Education Loan Program (FFELP) and the William D. Ford Federal Direct Loan Program (FDLP). While FDLP uses the FAFSA and federal government to determine loan eligibility, FFELP loans come from private institutions and can be applied for separately.

Government loans often carry a fixed interest rate of 6.8%, but certain categories of loans may have slightly higher rates. Many people choose government loans because of the more flexible repayment options, and graduates feel more secure taking out loans backed by the government. Borrowers should, however, shop around and make sure that they acquire optimal rates and conditions when taking out a student loan. Though government loans do offer a dependable resource that students and parents already know about, private loans increasingly compete with the rates and conditions offered by the government. In addition, students need to remember that government lenders restrict the amount of money borrowers can take out each year. These loans may not pay for the full cost of tuition. Private lenders do not cap the amount of funding and can supplement government loans. So too, government loans base funding on demonstrable financial need rather than credit history, and some borrowers find that their secure financial situation proves a hindrance rather than a help when applying for these loans.

Despite these considerations, a government student loan remains the standard financial source for college students looking to pay for school. Of the 65% of full-time college students who take out loans, the vast majority originate federal or state backed loans. A government college loan can be an excellent and dependable way to pay for some of the living and tuition costs of college, and students should apply for these loans before they decide that they cannot possible afford a college education.

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Apply for a government college loan today.