Education Loan in USA

Can you tell me about the types of Student loans available in the USA or United States of America as I want to apply for a one?

[Shaleen]

Student loans in the USA or United States of America are a form of financial aid that usually needs to be repaid. Student loans play a very large role in U.S. higher education as nearly 20 million Americans attend college each year and close to 12 million – or 60% - borrow annually to help cover costs.

Student loans come in several varieties in the United States, but are basically split into federal loans and private student loans.

The federal loans, for which the FAFSA is the application, are subdivided into subsidized (the government pays the interest while the student is studying at least half-time) and unsubsidized.

Federal student loans are subsidized at the undergraduate level only.

The main types of student loans in the United States are the following:

1.
Federal student loans made to students directly.

These loans are made regardless of credit history; approval is automatic if one meets program requirements.

The student makes no payments while enrolled in at least half-time studies.

If one drops below half time or graduates, there is a six-month grace period.

If one re-enrolls in at least half-time status, the loans are deferred, but when they drop below half time again they no longer have access to a grace period and repayment must begin.

For those who are disabled, there is also the possibility of 100% loan discharge if one meets the requirements.

There are loan forgiveness provisions for teachers in specific critical subjects or in a school with more than 30% of its students on reduced-price lunch (a common measure of poverty.

One employed full-time by a public service organization, or serving in a full-time AmeriCorps or Peace Corps position qualifies for loan cancellation after 10 years of 120 consecutive payments without being late.

However, loan for - give nesses or discharges are considered taxable income by the Internal Revenue Service under 26 U.S.C. 108(f).

2.
Federal student loans made to parents (PLUS loans):
Much higher limit, but payments start immediately.
Credit history is considered; approval is not automatic.

3.
Private student loans, made to students or parents:
Higher limits and no payments until after graduation, although interest starts to accrue immediately and the deferred interest is added to the principal, so there is interest on the (deferred) interest (which Is not the case with subsidized student loans).

Interest rates are higher than those of federal loans, which are set by the United States Congress. Private loans are, or should be, a last resort, when federal and other loan programs are exhausted. Any college financial aid officer will recommend borrow the maximum under federal programs before turning to private loans.