Federal loans

Loan queries should not be kept pending

By the borrower & should be cleared in advance to avoid any repercussions afterwards. The borrower should understand his responsibilities before moving towards loan decision as it is a legal liability & legal action can also be taken against him. [...]


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What is a federal loan ?

Federal loans are funds made available to parents for fulfilling their dream of making their child completing higher studies.

Such loans act as an aid for parents who are not financially sound & found themselves incapable of paying their children's college fees. Such funds are paid directly to college by the government. Its flexible repayment terms make everything easy for the parents. Private loans on the other hand are costly as higher rate of interest is charged. As the name suggests they are non-government loans granted by banks & credit unions. Whenever you are considering for taking student loan, it is recommended to go first for federal loans because less cost is involved and have great repayment options - nation21cashloans.com, additional benefits are available & easy repayment plans.

Loan decision

Before deciding for to take a loan, a person must consider the legal obligations attached to it. You should check your eligibility of repayment of loan amount & interest. You should understand your responsibilities as a borrower. You should forecast your obligations & income earned so that it becomes easy to make an estimate of repayment capacity. Since you are considering taking the federal student loan, you should also do a little research regarding starting salaries available in the job of your field. The terms & conditions should also be understood properly before signing a promissory note because by signing a note you agree to terms. Even if you are unemployed after completing your education, you are required to proceed as per those repayment terms signed by you. You can build a good credit score, by meeting your obligations on time as per repayment plan. In case you have any problem in making loan repayment, notify your loan provider in advance so that possible solution can be adopted timely. Any delay in loan repayments may affect your credibility & could worsen the situation that becomes difficult to handle when it becomes Can Be an Enemy of Retirement.

Procedure to obtain a federal loan

You can apply for this government student loan by filling up application form related to Free Application for Federal Student Aid (FAFSA). This application unlocks the access to federal loans. For applying private loans also you are required to fill this application form. They will also guide you regarding acceptance of loan. After that, the student will attend the entrance counseling & sign a Master Promissory Note (MPN) before receiving loan funds. Entrance counseling will guide students regarding their repayment obligations & MPN is an agreement to terms & conditions of the loan. It is considered better that parents of students should attend this counselling session instead of the child to have a better understanding of repayment obligations. After completing all formalities, the student shall be eligible for receiving loan disbursements.

Default in Federal loans

There is no surprising fact that defaults in student loans is increasing even though interest rate is low & repayment terms are easy. This is because of unemployment or may be sudden financial crisis. However this situation can be avoided if things are planned in advance by the parent as well as the child. They should estimate in advance, how much they are going to spend as college fee & how much they require paying as loan installment.

There have been changes in interest rates during 2015-16 as compared to 2014-15. Interest rates for all types of federal loans have been lower down except Perkin loans on which interest rate are still 5%. These changed interest rates shall not apply to your old debts borrowed in the past. However, the borrower has the option to consolidate their multiple loans into one loan. In that case, borrower shall be charged average interest rates.

Limits for borrowing federal loans

The federal loans are subject to certain limit which varies as per the qualification of the student. The limits vary with the type of loan also. The eligibility criteria will consider the educational qualification &type of loan for finalizing the credit limit.Following are the limits depending upon the qualification of the student:

For students who have not completed their graduation, it is Up to $5500 per year in Perkin Loans& more than $5500 but less than $ 12500 per year in case of other loans except plus loan. If a student has completed his graduation, he can take loan up to $8000 per year if it is a Perkin loan & if it is unsubsidized loan the limit will be up to $ 20500. There is another category that is of dependent students which are studying &are dependent on their parents. For this category of student, there is not minimum limit prescribed but maximum amount which they can avail is attendance cost reduced by any kind of aid received by him. Like private loans credit check is required in case of plus loans also.

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30. 12. 2015

This will help in planning the funds & defaults can be reduced.

You should never borrow more than your earning capacity as later it will become difficult to repay the amount.