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What are Government Student Loans?

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Government student loans are a sort of financial aid for students provided by a government. Students consider these loans to be more beneficial due to lower and fixed interest rate and different protection and forgiveness programs.

Federal Direct Student Loan Program provides United States government student loans based on the U.S Department of Education. Previously, Federal Direct Student Loan Program was a set of institutions under the Federal Family Education Loan Program (FFELP). Now, it works as a part of the Department of Education.

It offers plenty of opportunities for students to finance their education. There are four types of student government loans:

  • The Federal Direct Subsidized Loans are available to undergraduate students with extraordinary need of financial help. Usually, interest rates on Federal Direct Subsidized Loans stand at 3.4%.
  • The Federal Direct Unsubsidized Loans are available to undergraduate and graduate students with no special limitations. Such loans also offer a grace period during which students can postpone payments but he will have to pay them off later. Interest rates are usually about 7.6%.
  • The Federal Direct PLUS Loan is suitable for graduate and professional degree-seeking students. The requirements are stricter. The potential borrowers must have a clear credit history and no defaults on any previous loans. Interest rates are usually up to 7.9%.
  • The Federal Perkins Loan Program is available for undergraduate and graduate students with extreme financial needs, who are engaged part-time or full-time at college/university activity. Interest rates are as low as 5%.

Students can refinance government student loans but it usually makes less sense as getting a lower interest rate is impossible.

Read the difference between subsidized and unsubsidized student loans.