Student loans can help students achieve their higher education dreams, regardless of their financial circumstances. For students who want to study in the United States, educational loans are an important source of financing. In this article, we’ll explore the types of education loans available to students who want to study in the United States, including eligibility requirements, repayment options, and debt management tips.
Types of Education Loans
There are two main types of educational loans available to students who want to study in the United States: federal loans and private loans.
Federal loans are issued by the US Department of Education and are available to US citizens and permanent residents who are enrolled in an accredited school. There are two types of federal loans: direct subsidized loans and direct unsubsidized loans.
Direct Subsidized Loans are available to undergraduate students who demonstrate financial need. The government pays the interest on these loans while the student is in school and during the six-month grace period after graduation. The interest rate for Direct Subsidized Loans is set at 3.73% for loans disbursed from July 1, 2021 through June 30, 2022.
Direct unsubsidized loans are available to undergraduate, graduate, and professional students, regardless of financial need. Interest on these loans accrues while the student is in school and during the grace period. The interest rate for direct unsubsidized loans is set at 3.73% for undergraduate loans and 5.28% for graduate or professional loans for loans disbursed from July 1, 2021 through June 30, 2022.
Both direct subsidized loans and direct unsubsidized loans have annual loan limits based on the student’s grade level and dependency status. In addition, there are lifetime loan limits for each type of loan.
Federal loans also offer other benefits, such as payment plans based on income, loan forgiveness options, and deferment and forbearance options.
Private loans are issued by private lenders and are available to both US and international students who are enrolled in an accredited school. Private loans generally have higher interest rates than federal loans and require a credit check.
Private loans can be used to cover the cost of tuition, room and board, books, and other expenses. Private loans may have variable interest rates that can change over time, so it’s important for borrowers to understand the terms of their loans.
To be eligible for federal loans, students must be enrolled in an accredited school and meet other eligibility requirements. To receive Direct Subsidized Loans, students must demonstrate financial need, while Direct Unsubsidized Loans are available regardless of financial need. Students must also maintain satisfactory academic progress to remain eligible for federal loans.
To be eligible for private loans, students must meet the lender’s eligibility requirements. These requirements typically include a credit check, and international students may be required to provide a co-signer who is a US citizen or permanent resident.
Federal loans offer several repayment options, including standard repayment, extended repayment, graduated repayment, and income-based repayment. Standard repayment plans allow borrowers to repay their loans over 10 years, while extended and graduated repayment plans offer longer repayment periods with lower monthly payments.
Income-based repayment plans adjust the borrower’s monthly payment based on income and family size. There are four income-defined payment plans available: Income-Based Pay (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income Contingent Pay (ICR). These plans can help borrowers manage their monthly payments and may offer loan forgiveness after a certain number of payments.
Private loans may also offer payment options, but these options can vary by lender.