Take Advantage of Federal Student Loans

Direct Loan and FFEL Programs

Federal student loans come in two versions: the Direct Federal Loan Program and the Federal Family Education Loan Program. These are key components in a successful college financial aid strategy.

Here’s the deal: federal student loans should be the very first step you take in the financial aid process:

  • The Direct Federal Loan program is administered through the U.S. Department of Education who also acts as lender for the program.
  • The Federal Family Education Loan Program, or FFELP, includes the Stafford Loan, PLUS Loans and Federal Consolidation Loan. This program makes federal loans possible through private lenders, such as Sallie Mae and Nelnet. When private lenders are able to offer federal student loans more students have access.

Federal student loans are guaranteed by the government, which means if you default on any loan repayment the government will back the lender financially for the loss.

Good news: federal loans are some of the most affordable and almost everyone qualifies for some aid.

So, what sets federal student loans apart from private loans and other loan types?

Federal Loan Interest Rates

Because federal loans are funded by or guaranteed by the government, interest rates are significantly lower than private student loans. The FFELP program allows private lenders to offer the loans, but it also regulates interest rates and other loan features that ensure borrowers are treated fairly and consistently.

Flexible Repayment Plans

Unlike private student loans your federal loans do not come due for repayment until 6 months after you graduate or leave college. This grace period is designed to allow you to get on your feet, financially before repayment commences. How much you pay each month and for how long depends on the type of repayment plan you choose when you are approved for the loan. Payment plans include: standard, graduated, extended and income-contingent.

Parent PLUS loans are due for repayment as soon as the loans are fully disbursed.

How To Apply for Federal Loans

The key to securing a federal loan for your college career begins with the FAFSA. You will need to fill out the FAFSA before the federal as well as your state’s deadline. When you file a FAFSA you are automatically considered for all federal loans and grants depending upon the financial information you provide. Almost every student qualifies for Stafford Loan aid, subsidized or unsubsidized.

What happens once you’ve filed the FAFSA?

The follow-up to the FAFSA is your Student Aid Report or SAR. This report is generated by the government from your FAFSA and a copy goes to all colleges to which you’ve applied. This way they are in a position to offer you an aid package (award letter) based on your financial situation.

When you have an award letter or aid package in hand from the college you’ve chosen your next step is to choose a financial aid lender. In the past colleges and universities provided students with Preferred Lender Lists—these are out. You are free to choose your own lender for your federal loans.

Federal Student Loans are Binding and Real

If you are under the impression that student loans are somehow less serious or not a big deal, you are mistaken. It’s important that you take the loans seriously. Although it may be years before you begin repayment your financial future depends upon your diligence with repayment and all loan terms.

Remember, use federal student loans before you use any others.