Student loans are an indispensable source of funding for those pursuing postsecondary education. They may be obtained through both federal government and private lenders.
However, student loan payments can be an economic and social burden for many. That is why student loan forgiveness is such an important policy: it helps improve the quality of life for borrowers and their families by eliminating this financial stressor.
Pell Grants
The Pell Grant is a federal financial assistance program designed to assist low-income students with covering college expenses. These grants are awarded to undergraduate students who demonstrate exceptional need and demonstrate exceptional financial need.
Eligibility for the grant depends on several factors, including the Expected Family Contribution (EFC), the cost of attendance at an accredited institution and whether or not a student is enrolled part-time or full time.
More than 80 percent of Pell Grant funding comes from annual appropriations. Presidents and Congress typically increase the Pell Grant amount annually; however, since lawmakers usually appropriate funds many months before grants are awarded, funding levels for education programs may fluctuate if estimates of expected costs prove inaccurate.
Direct Subsidized Loans
Direct Subsidized Loans are federal student loans available to undergraduate students based on financial need. Your loan amount depends on information from your Free Application for Federal Student Aid (FAFSA) and information provided by your school’s financial aid office.
Subsidized loans usually don’t accrue interest while you are enrolled at least half time in your program. They begin to build interest once you graduate or drop below half-time enrollment status.
The government pays the interest that accrues on your loan; however, this does not cover the full amount due – which you must pay upon graduation.
Direct Unsubsidized Loans
Direct Unsubsidized Loans (DULs) are low-interest loans offered to undergraduate, graduate, and professional students by the federal government to help cover college expenses. These loans may be taken out for any purpose – whether that be education, travel, or living expenses.
Your loan amount is determined by your cost of attendance and financial need. There is an annual maximum limit, as well as an aggregate loan limit that caps how much can be borrowed throughout your academic career.
While in school at least half-time, you do not need to make payments on your Direct Unsubsidized Loan. However, interest will accrue on the loan during grace periods and deferment or forbearance periods.
Federal Perkins Loans
The Federal Perkins Loan is a campus-based loan program that provides students with an annual limit of $4,000 and a lifetime limit of $20,000. These loans are available to undergraduate and graduate students alike.
These subsidized loans do not charge any origination fees and interest only accrues while the student is in school. However, repayment must begin nine months after graduation or leaving school and there are 10 years to repay the loan in full.
These loans provide a range of repayment options, such as income-driven plans and deferment possibilities. Furthermore, their fixed interest rate of 5% is much lower than many other private loans available;
Federal Direct Loans
Federal Direct Loans are an excellent way to finance your higher education. These loans have several advantages over private student loans, such as no credit score requirements and no cosigner requirement.
Subsidized interest costs for undergraduate students are limited to 3.73 percent. Unsubsidized rates vary based on your year in school and whether you are a dependent or independent student.
Graduate and professional students are eligible for Direct Plus loans, which do not have a dollar-amount limit on how much can be borrowed.
Federal Direct Loans can be a helpful option to reduce college financial aid burden, but be sure to use them wisely and with caution. Before applying for loans, make sure you apply for all available federal student aid options including grants and scholarships first.
