Federal Student Loans
Definition
Federal student loans are loans established by the federal government and provided to students for college and graduate school. The money can come from banks, savings and loan associations, credit unions, states, colleges, and the federal government itself.
Prerequisites
To be eligible, the student must: • • • • • • • • • Be a U.S. citizen or eligible noncitizen Be enrolled at least half time at an eligible school (virtually any school offering a degree program is eligible) Have a high school diploma or equivalent Be making satisfactory progress in the selected course of study Have a valid Social Security number Not be in default on any other federal student loans Not have borrowed more than the allowable limits Have registered for the Selective Service, if a male Promise to use the loan money only for educational expenses
Key Strengths
• • • • • • • Interest rates are favorable Repayment terms can extend from 10 to 30 years Most loans have subsidized interest Grace period allows you to find a job after graduation Deferments and forbearance periods are allowed if you suffer hardship Can borrow from multiple loan programs Interest is tax deductible in some circumstances
Key Tradeoffs
• • • Program details and rules change frequently There are borrowing limits for undergraduate and graduate studies Origination and insurance fees
Variations from State to State
• Federal student loans do not vary by state, although most states have their own individual student loan programs
How Difficult Is It to Implement?
• Fairly easy to implement. Fill out the FAFSA application.
For additional help or questions, please call
John J. Hough, CFP® Innovative Planning Services 80 Crossways Park West Woodbury, NY 11797 516-677-6221 JohnHough@ipsnna.biz