Federal student loans and private student loans, also referred to as alternative student loans, are both options for students who require financial aid for college.
While private loans are typically made by private banks, credit unions, state agencies, or other financial institutions, federal student loans are directly issued by the federal government.
Federal student loans can help bridge the funding gap for education-related costs that scholarships, grants, and work-study programs don’t cover, provided that basic eligibility requirements are met.
Federal student loans require repayment with interest. The Federal Direct Loan Program (FDLP), which is owned by the Department of Education, provides funding for all federal student loans made after June 2010. The government of the United States sets the terms, conditions, and interest rates.
Before June 2010, the Federal Family Education Loan Program, or FFELP, funded loans. Many of the loans made under this program were originated by institutions like banks, lenders, or non-profits, and they are still in their ownership or that of the Department of Education.
Currently, a variety of federal student loan programs are accessible depending on eligibility and need:
Between the actual cost of your education and the federal student aid you receive, private student loans help close the gap.
The FASFA is not necessary to apply for private student loans from banks, credit unions, or other lenders; instead, borrowers must complete a self-certification form. Instead of being determined by the federal government, the lender determines interest rates, loan limits, terms, and conditions.
Your credit history, whether you have a co-borrower, their credit history, and the school or course of study you choose are just a few of the variables that will determine whether you qualify for a loan, how much you borrow, and the terms and conditions attached.
Who Can Get Federal Student Loans
Federal student aid is available to anyone enrolled in a four-year institution, community college, or career school, including:
Most federal aid is decided based on financial need. To be eligible, students must fill out the FAFSA® and adhere to a number of other basic eligibility requirements.
Federal PLUS Loans, which are federal student loans open to parents, These loans may also be used to cover the cost of a student’s education.
|for Loans Disbursed Between July 1, 2022 and June 30, 2023|
|Direct Loan for Dependent Undergraduates||Direct Loan for Independent Undergraduates||Direct Loan for Graduates||Direct Parent PLUS||Direct GradPLUS|
|Subsidized Interest Rate (new loans)||4.99%||4.99%||N/A||N/A||N/A|
|Unsubsidized Interest Rate (new loans)||4.99%||4.99%||6.54%||7.54%||7.54%|
|Loan Limit 1st Year||$5,500 1, $3,500 2||$9,500 1, $3,500 2||$20,500 1, $8,500 2||None||None|
|Loan Limit 2nd Year||$6,500 1, $4,500 2||$10,500 1, $4,500 2||$20,500 1, $8,500 2||None||None|
|Loan Limit 3rd Year and Beyond||$7,500 1, $5,500 2||$12,500 1, $5,500 2||$20,500 1, $8,500 2||None||None|
|Demonstrate Financial Need?||Yes – subsidized, No – unsubsidized||Yes – subsidized, No – unsubsidized||Yes – subsidized, No – unsubsidized||No||No|
Limit of combined subsidized and unsubsidized funds. back Students whose parents are unable to obtain a PLUS loan may be eligible for additional unsubsidized loans. back.
Following the exhaustion of all available scholarships, grants, and work-study opportunities, Direct Stafford Loans are frequently taken out.
There are two types of Stafford Loans: subsidized and unsubsidized.
While you are still in school, the government pays the interest on subsidized loans.
While you are still enrolled in school, you are liable for paying the interest that accumulates on unsubsidized loans. When you graduate or stop attending classes full-time if you don’t pay the interest while you’re still enrolled, it will be capitalized and added to your principal balance.
Benefits: Dependent on years of study and degree status, there are no payments necessary while enrolled at least half-time. Generous borrowing limits are also available.
Nearly all students, regardless of credit history, are qualified for Stafford Loans. Financial need, as determined by the FAFSA, determines whether the loan is subsidized or unsubsidized.
Stafford loan limits rise each year that you are a student. See the chart above for details.
Direct PLUS Loans for Parents
Parents may decide to borrow money to help cover the costs of their children’s higher education in order to reduce the overall cost.
Benefits: PLUS loans can assist in covering the costs of education not covered by federal student aid. Parents can also postpone loan payments until after their children graduate. Parents don’t have to demonstrate financial need to apply for these loans because they are not need-based.
Eligibility: Eligibility depends on a modest credit check. If the borrower has bad credit, an endorser might be needed. Before a PLUS loan can be awarded, some schools demand that a FAFSA be submitted, but some do not.
GradPLUS Loans for Graduate and Professional Students
This loan is only available to individuals pursuing graduate or professional degrees.
Benefits: This loan is similar to the parent PLUS loan in that it can cover all tuition and education-related costs, less any other aid received, and that payments may be deferred (put off) until after graduation.
Eligibility: This type of loan requires a minimal credit check. If the borrower has bad credit, an endorser might be needed.
Students must submit the FAFSA as soon as possible after January 1 of each year they intend to attend school in order to be eligible for federal financial aid.
Parents can apply for a PLUS loan by completing a Direct PLUS Loan application and Master Promissory Note (MPN), and the schools financial aid office can provide additional instructions. The office may also offer the option of completing the PLUS application and MPN online at StudentAid.gov.
Student Loan Servicers (Customer Service)
Your student loan is given to a loan servicer once you have obtained it. The servicer processes your payments, guides you through repaying your loans, and responds to any inquiries you may have regarding your student loan account.
Nelnet offers customer service for both the Department of Education’s and other lenders’ federal student loans, and we are happy to assist in any way we can.
Are Nelnet loans private?
Nelnet has assisted students with financing their education for more than 40 years. We are pleased to provide private student loans through Nelnet Bank because of this. These loans are available to students who need to make up any shortfalls in their federal financial aid or who may want to refinance their student debt.
Are Nelnet loans eligible for forgiveness?
Borrowers from the Nelnet network may be eligible for federal programs run by the U S. Department of Education. What forgiveness or cancellation options are available for federal borrowers?.
How do I know if my Nelnet loan is federal or private?
For federal student loans, the name of your student loan servicer and your federal student loan program will appear at the top of a student loan bill. For private student loan bills, the bill will instead list the name of your private lender.
Did Nelnet take over federal student loans?
Beginning on or around October 28, 2021, FedLoan Servicing will start transferring loans to Nelnet. Multiple transfers will take place through June 2022. Prior to the transfer of their loan(s), borrowers will be informed at least two weeks in advance.