What are Federal Loans?
Copyright 2009 Debt Free Services, Inc.: Student Loan Finance Options. All Rights Reserved.
Debt Free Services Programs are for Federal Student Loans. Federal student loans are loans that are guaranteed by the Federal Government.
Federal student loans and private loans are available to students to help pay for their education. Federal student loans have lower, fixed interest rates, generous repayment plans, no prepayment penalties and no credit checks (except for PLUS Loans).
In contrast, private loans, which may be aggressively marketed to students through TV ads and other media, are substantially more expensive than federal student loans. They generally have higher, variable interest rates that may substantially increase the total amount you repay. The interest rate you receive might depend on your credit score. Private loans can also have prepayment penalty fees.
If your bank or other private lender provides loans that are backed by the federal government, then they are participating in the FFEL program. Be sure to ask if they do. Documents for a federal student loan will state somewhere on the form that it is a federal student loan. Some private student loan lenders have forms that look similar to the federal forms and might confuse some students.
*From the booklet "Your Federal Student Loans" provided by the US Department of Education.
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