Private banks through their marketing efforts try to showcase that the private loans are better compared to federal student loans. But, In reality private student loans end up costing thousands in extra interest and fees. Also, it avoids you of federal aids on student loans which can be life savers in difficult financial times. Thus, Federal student loans advantages are worth the few hours needed to be spend in filling out a Free Application for Federal Student Aid and opting for federal student loans which can save big money and heartache in the long run.
Federal Student Loans Advantages
Fixed interest rate:
Federal loan interest rates are fixed. Thus, payments won’t rise if rates rise.
The government allows you to defer payments while you attend school at least half-time. However, interest will keep on adding to overall loan balance
Income based repayment:
Students expecting to go into low-paying or public service jobs can choose monthly payments that match their low incomes by applying for “Income-Based Repayment.” That program requires them to pay no more than 15% of their income, instead of a fixed payment. Students who take out loans after 2014 can limit their future payments to 10 percent of their income.
Consolidating loans with federal government:
Students who consolidate their loans with the federal government, apply for “Income-Based Repayment,” and continue to make on-time payments can get at least some of their debts forgiven. Public servants can wipe out their remaining debts after 10 years. Currently, those with low incomes who continue to make payments can wipe out their remaining federal student debt after 25 years. Starting in 2014, the length of time until low-income forgiveness will drop to 20 years on all new loans.
No charges on early repayment:
The federal government doesn’t charge anything extra for repaying student loans early, while private lenders have early prepayment charges
Hope above highlighted Federal Student Loans Advantages proves useful in making right decision by you.