By: Mary Jones
traveling knowledge
Most students take out loans
Most college students these days take out student loans to pay for the cost of higher education. In fact, about 65% of graduates in 2019 had borrowed student loans
No credit history needed
Most loans from financial institutions, such as a bank or credit union, require a credit history, but federal student loans don't.
No co-signer needed
Federal student loans aren't based on credit, which college advisers say allows the student to take on the responsibility without asking a family member or friend to co-sign
Fixed interest rates
Experts say the main advantage of a fixed-rate loan, as opposed to a variable-rate loan, is that the borrower is protected from sudden or significant increases with their monthly payments if interest rates rise.
Lower interest rates than private loans
federal student loan was disbursed on or after July 1, 2020, and before July 1, 2021, the interest rate is 2.75%. Experts say private higher education loans tend to have higher interest rates because they are considered risky to the lender.
Interest accrual may begin after college
Students with demonstrated financial need who receive a subsidized federal student loan do not pay interest as long as they are enrolled in school on at least a half-time basis.
Forbearance and deferment options
Applying for forbearance or deferment postpones student loan payments. Both of these are available under the federal student loan program
A repayment grace period
This grace period is available to students who borrowed direct subsidized loans and direct unsubsidized loans, but borrowers should be aware that interest does begin to accrue during the grace period
Income-driven repayment options
four different income-driven repayment plans are offered under the federal student loan program. The Pay As You Earn Repayment Plan and the Revised Pay As You Earn Repayment Plan
Takes longer to default
Federal student loans give borrowers more time to make payments, even if they have missed more than one payment. According to the Department of Education
Consolidation available with poor credit
Borrowers with multiple federal student loans can consolidate them into one direct loan with one monthly payment.
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