Pros and Cons of Federal Student Consolidation Loans

The main components of the federal Stafford student loan are the two types of financing programs for post-secondary students.

Stafford loans are under the administration of the US Department of Education and comprise the William D. Ford Federal Direct Loan (Direct Loan) Program and the Federal Family Education Loan (FFEL) Program.

Only students can apply for a Stafford loan by filling an FAFSA (Free Application for Federal Student Aid) and send it to whatever school they want. Once the form is reviewed, the school decides the financial eligibility.

For direct student loans, the federal government is the lender but the FFEL program allows you to choose the lender using a list offered by the school or a qualified lender.

Under this program, the federal government will guarantee for the loan. The loan can be subsidized (the federal government pays the accrued interest while you’re in school) or unsubsidized (the accrued interest will be included in your loan balance).

If a student brings all the correct documents, then he/she can benefit from a subsidized Stafford loan.

Each year in school influences the federal Stafford loan limits and also the subsidized / unsubsidized financing. Below you can find the current regulations that can influence your loan:

Pros: – The credit checks are not required because the Federal government guarantees for the loan. – The fixed rate interest rates are the lower interest rates on the market – The repayment plans offer very flexible terms. This means that you will set the payment plan that fits you best and also you can consolidate your other loans into a single and more affordable one. – During student enrollment the repayment is deferred.

Cons:

– Sometimes the loan limits are insufficient especially considering today’s post-secondary education costs. – You have to submit a FAFSA (Free Application for Federal Student Aid). – You have to ask for Stafford loans every year and in time this leads to multiple payments and loans that will affect your post-graduation life. – You will only direct the use of the funds because they are processed and collected only by the school for your lab fees, books, tuition, etc.