What Are The Benefits Of Federal Student Loans?

Government student loans after scholarships are called federal student loans. These loans are convenient to access, flexible as well as cheaper if you wish to lower repayments compared to private student loans. You will never need any co-signer or a good credit score for getting a federal student loan.

  • Lower Rate of Interest And Fees

Federal student loans usually have lower rate of interests than private loans. Rate of interest of new federal loans are fixed. So they will remain the same during an entire loan period. Private loans often provide variable rate of interest that increases whenever the benchmark of the rate of interest is raised by the Federal Reserve. If you get an option, a private loan with a fixed rate of interest is a better choice. Refinancing of a student loan can offer you a lower rate of interest if your credit score is strong and you start earning after graduating. It will also aid you in turning any private loan with a variable rate of interest into a loan with a safer and fixed rate of interest.

  • No Credit Report

 Federal loans are available to any undergraduate. But Direct PLUS federal loans that are accessible to graduate students as well as parents will need a credit check. Private loans need a credit history for showing you will make timely loan repayment. Your credit score will also be used to decide the rate of interest that will be applied on your approved loan. But most of the undergraduates will be having short credit history and low credit score if they have any score at all. So before opting for a private student loan, take a maximum amount of federal student loans. If you require a private student loan to cover your school’s funding gap, but there is no credit history or score, then there are many loan providers or lenders who may aid you.

  • Co-Signer Not Required

 As federal loans are not based on credit score or history, they never need any co-signer. So your family member does not have to get worried about making repayments if you cannot. Undergraduates or graduates with no credit can qualify for private student loans if they bring a co-signer mostly a parent or some adult with a good credit and who agrees to repay the balance of the loan if the student is unable to repay. You can also look out for such a private loan that allows release of a co-signer after few repayments

  • Greater Time To Pause Repayments

Deferment in federal loans will allow you to postpone repayments because of economic challenges till 3 years.

  • Good Credit Not Needed For Consolidation

 If you have many federal student loans, you can consolidate them into a single payment easily. Federal consolidation will make some of the loans eligible for Public Service Loan Forgiveness along with repayment plans that are driven by income. But it will not save your money as the rate is decided by one weighted average of the rate of interest of your previous loan.

  • Consolidation Of Several Federal Loans Into One Without Any Credit Check

You will be able consolidate as well as refinance a student loan via private loan provider. It will reduce your rate of interest depending on your credit score as well as income.

  • Greater Options Of Forgiveness

 Unlike private student loans, federal student loans can get dissolved if you take part in a repayment plan that is driven by your income or you work for the government or at any non-profit organization. After 10 years federal loans are forgiven by Public Service Loan Forgiveness. Borrows of Perkins loan who work in any public service can get the option of loan forgiveness after a much shorter time.

  • Assured Loan Cancellation If A Borrower Dies

 A federal student loan will get discharged if a borrower dies or becomes disabled permanently. Any parent PLUS loans that has been taken on behalf of a student will get cancelled too if the parent who hold it dies.

  • Lower Rate Of Interest On Subsidized Federal Student Loans

Students with high financial requirement will qualify for subsidized federal student loans. The interest on these loans if there is any deferment while a borrower is in school, there is a grace period or a break from repayments is repaid by the government.

  • Income Driven Repayment Is Accessible

 A federal student loan makes it easy to reduce repayments if you require to. You need to apply for repayment that is income driven and thus you will be repaying a certain percentage of your monthly income or nothing if you have no income. You must reapply each year and ensure you are on this plan that will be most beneficial for you.


  • More Time Before Any Default

 There are many private student loans that go into a default status if you miss a single repayment. A federal loan will give you some time to bring your repayments on track if you fail to make it. There will be no default announced and you will not be reported to the credit bureaus until you miss 3 monthly repayments. Your federal student loan will become a default after 9 months of missed repayments. At that time, the government will be taking money from your income or your tax return for recovering the debt.

 So before you decide to take a student loan, understand the benefits of taking it. Then decide accordingly which student loan will be best suited for you. Also ensure that you will able to make timely repayments before you apply for the loan.