Federal Student Loans Plus

What are FSL?

These loans are federally guaranteed student loans provided by the U.S. government. This means they provide financing directly to the lending institution without going through banks. These loans have fixed interest rates and repayment terms, and if not paid off on time, can result in higher fees and penalties. However, these loans are convenient for students due to their flexibility and low cost compared to private student loans.

Benefits of FSL

FSL offers borrowers the following benefits:

No credit check required

Flexible payment options

Low-interest rate (compared to private loan)

How do I qualify for FSL?

To qualify for FSL, applicants need to meet certain federal requirements including:

Have been accepted into a college or university

Earn a minimum 2.5 GPA

Have applied for financial aid

Be enrolled at least half-time

Not defaulted on any federal student loans

Federal Student Loans Plus

The Federal Student Loan program was created in 1992. Through 2012, there were over $350 billion in student loans outstanding. These loans have since been privatized and now make up about 13% of total consumer debt. These private student loans are not backed by the federal government so they carry much higher interest rates than their government counterparts.

Private Student Loan Interest Rates (2013)

Average Annual Rate – 10.50%

Minimum Monthly Payment – $0

Maximum Payment – $15,000

Most people do not realize that these are considered normal credit card rates. On average, people pay 4 to 5 times their monthly income towards student loan payments every month. While many students find themselves struggling to pay off their student loans, others find that their monthly payments are manageable and don’t exceed 15% of their monthly household income.

Student Loan Debt Statistics

$1 Trillion – Total national student loan debt

$850 Billion – Amount of principal owed on student loans (in 2013)

$110 Billion – Amount of interest paid on student loans (in 2012)

Average Lifetime Cost of Education – $240,000-$295,000 (Forbes.com)

Federal Student Loans Plus

Federal student loans

The federal government offers two types of student loan programs — Stafford and PLUS. Under the former program, students may borrow a fixed amount of money for college; under the latter they may borrow above and beyond their cost of education to help pay for expenses not covered by financial aid.

PLUS loans

The federal government’s subsidized lending program known as PLUS loans enables parents or guardians to lend money to undergraduate students at below-market interest rates. As long as borrowers make timely payments, the parent/guardian doesn’t have to repay the loan while the borrower does. Borrowers who want to finance graduate school or pursue professional degrees can use the same program to borrow money to cover tuition costs.

Federal Perkins Loan Program

Under this program, private lenders subsidize the cost of an individual’s schooling. By law, no more than half of the total funding for any given student loan may come from federally insured loans (Stafford and PLUS). Parents and guardians can apply for a Perkins loan if they meet certain criteria, including having enough liquid assets.

Federal Student Loans Plus

What’s the difference between Federal Student Loans and PLUS loans?

There are two types of loans: federal student loans and private student loans. A federal loan is provided by the U.S. Department of Education and offers borrowers low interest rates. Private loans, however, offer higher interest rates and less favorable terms than their federal counterparts.

Should I get both a federal student loan and a private student loan?

For many students, having access to both federal and private student loans is the best option. If you have bad credit history, a private lender may not give you a loan at all. Having a federally guaranteed loan means you don’t need to worry about private lenders turning you down. However, if you do want to take out a private student loan then you’ll benefit from a lower rate and better repayment options.

How much does my college cost me?

The total cost to attend college varies depending on where you go, how long you stay, and what type of financial aid package you receive. You can use the College Board’s estimated average costs tool to find out how much a school might cost you over four years.

Can I change colleges once I start?

Yes! Once enrolled in a program at a particular school, you commit yourself to paying tuition and fees for 4 years. If you decide to leave before graduating, however, you may have to pay back some or all of the money you borrowed for your education. Remember, though, that only half of undergraduates graduate in 4 years; the rest either transfer schools or drop out.

Do I owe any money?

Some people think they’re free and clear after graduation, but there are still bills to pay. Even if you received grants and scholarships along with your federal loans, you’ll still need to pay off your debt—but they may help speed up the process. In fact, according to one study, graduates who took advantage of grants and scholarships paid off $16,000 less in debt than those who didn’t. So, while your loans aren’t completely free and clear, using them to fund your future could save you thousands in debt payments.

Are there any ways to reduce my student loan burden?

As mentioned above, you can use your federal loans to pay for expenses not covered by grants and scholarships. But, if you’re looking for extra cash, here are five ways to make your college bills easier to manage:

Pay Off Your Credit Cards

Make sure your spending doesn’t exceed your income (especially if it’s going toward things like dining). If you have several high-interest cards, consider transferring balances to 0% APR cards, which often have lower minimum payments.

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