
The U.S. Department of Education through the Federal-aid makes a variety of federal programs available for college students. among those programs, we can count the loan or student loans as a financial assistance for school purposes. Unlike a grant, a loan is a form of debt incurred by an individual or other entity. The lender, most of the time a corporation or a financial institution, or a government, agrees to borrow a sum of money to a borrower.
However, this could not have happened without some set of terms including finance charges, interest, and of course some other conditions. When you receive a student loan, you are borrowing money to attend a college or career school. You must repay the loan as well as the interest that accrues. It is essential for you to understand your repayment options so you can successfully repay your loan.
Before going to some particular lender to pay for your study, you should always check what the U.S. Department of Education has for students. The federal student loan program of the U.S. Department of Education holds the William D. Ford Federal Direct Loan (Direct Loan) Program. In this program, the U.S. Department of Education is the lender, so students can expect a better rate.
Depending on the student's eligibility, this program has four different types of direct loans:
Besides this program, there are also:
CLICK HERE if you want to access instantly the federal student loan rates.
Direct Subsidized Loans
Traditionally, the Direct Subsidized Loans (DSL) are ideally suited to eligible undergraduate students who demonstrate financial need to help cover the costs of higher education at a college or career school. As cited above, it is way better to check with the U.S. Department of Education what are loans that they have available for students before going through any other financial institutions.
The DSL is a great program for undergraduate students with financial needs. Under this program, your school will determine the amount of money that you will need to cover your college costs. The best part of this program is that the U.S. Department of Education will pay the interest at least half-time while you are in school. Furthermore, you will also have a grace period of six months, which is a time where you are not required to make payments.
It is important to know that you must be enrolled at least half-time at a school that participates in the Direct Loan program to be eligible for the DSL. The first step ahead of any government program is to fill out and submit the Free Application for Federal Student Aid (FAFSA®) form. You can always count on the U.S. Department of Education for a good low-interest rate for your loan throughout the length of your program. Also, a good thing is, the interest that has been charged will be fixed for the life of the loan.
Besides the interest on the loan, there is also a loan fee, which is a percentage of the amount of the loan and it is taken from each loan disbursement.
Students who receive for the first time a Direct Loan are required to follow those steps:
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complete entrance counseling, a tool to ensure you understand your obligation to repay the loan;
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sign a loan contract called a Master Promissory Note (MPN), agreeing to the terms of the loan.
Direct Unsubsidized Loans
The U.S. Department of Education has all types of loans to better serve all categories of students. unlike the DSL, the Direct Unsubsidized Loans are loans made to eligible undergraduate, graduate, and professional students, but eligibility is not based on financial need.
The Direct Unsubsidized Loan is available for undergraduate and graduates students, however, the school will determine how much money you need for the school year. For this type of loan, the student is responsible to pay the interest on the loan during all periods. Students can choose to not paying interest on the loan while they are in school, but the interest will be accumulated and added to the principal of your loan.
The Direct Unsubsidized Loan (DUL) operates just like the DSL, students have to be enrolled at least half-time at a school that participates in the direct loan program. As a reminder, the Direct Loan Program is a federal student loan where eligible students and parents borrow directly from the U.S. Department of Education at participating schools.
To apply for the Unsubsidized Loan, students must start by filling out and submitting the Free Application for Federal Student Aid (FAFSA®) form, then the school will take information from the form submitted. Furthermore, just like in the DSL, DUL students can also count on the U.S. Department of Education for a good low interest rate on their loans throughout the duration of their programs. Also, the interest that has been charged will be fixed for the life of the loan. Be aware that a loan fee will be charged for each disbursement of your loan.
Just like the DSL, students who receive for the first time a Direct Loan are required to follow those steps:
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complete entrance counseling, a tool to ensure you understand your obligation to repay the loan;
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sign a loan contract called a Master Promissory Note (MPN), agreeing to the terms of the loan.
Direct PLUS Loans
The Direct PLUS Loans are different from Direct Subsidized Loans and Direct Unsubsidized Loans in so many ways. The DPS are loans made to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other financial aids.
Besides that, the borrower will have to pay interest on the loan, a credit check is also required in order to get the Direct PLUS Loan.
The same process is required for all financial aids, the borrower has first to fill out the Free Application for Federal Student Aid (FAFSA®) form. As stated above, the DPL could be used by parents of dependant undergraduate students or graduate or professional students.
CLICK HERE if you are applying for a Parent PLUS Loan. After submitting your request, your information will be sent to the school that you have selected, and the school will determine your qualification. If your credit file has had protection on it, you must lift it because the Direct PLUS Loan requires a credit check.
To receive the DPL, it is required to complete a Direct PLUS Loan Master Promissory Note, which will be available right after you finish with the DPL application.
Graduate or Professional students can apply for the Graduate/Professional Students PLUS Loan under the Direct PLUS Loan. CLICK HERE to apply.
Through this application, optionally, graduate or professional students authorize the school to use their loan funds to satisfy other educational-related charges after tuition and fees, and room and board (for on-campus students) have been paid.
Under the Direct PLUS Loans, the U.S. Department of Education is the student's lender, and a credit check will be always conducted.
Direct Consolidation Loans
If it has happened that you have multiple student loans, you can combine them all, and pay just one interest for all your loans. Though, the Direct Consolidate Loans allow you to combine all of your eligible federal student loans into a single loan.
This consolidation loan will bring your monthly payment to a single one on the new Direct Consolidation Loan.
Some facts about the Direct Consolidation Loans are that:
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there is no fee to consolidate your loans and the application is easy;
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the consolidation will simplify your loan repayment;
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the consolidation will lower your monthly payment, and it will also lengthen your repayment period;
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the consolidation can grant you access to additional income-driven repayment plan options;
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with the consolidation, you’ll be able to switch any variable-rate loans you have to a fixed interest rate;
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since the repayment period is lengthening, you will make more payments and pay more in interest;
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your principal balance in the loan will increase;
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you may also lose certain borrowers' benefits.
When considering consolidating your loans, it is important to choose only the ones that you want to.
The followings are the requirements to consolidate a loan:
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the loans you consolidate must be in repayment or in the grace period;
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to consolidate an existing consolidation loan, you must include an additional eligible loan in the consolidation;
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to reconsolidate a defaulted loan, you have to make satisfactory repayment arrangements on the loan before consolidation.
Private Student Loans
Students have to think twice before heading to a private institution for loans. Although private institutions can help you find the funds that you need within a minute, their interest rates are high and vary sometimes. Furthermore, government loans offer much more benefits.
For students who are borrowers of the federal student loan, They should carefully review the terms of a private student loan before giving up the benefits available on federal student loans. Be aware of all the benefits that you may lose if you refinance your federal student loan into a private student loan. The followings are some benefits that you may lose:

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access to temporary loan payment relief through approved periods. If for some unforeseen circumstances you are unable to make payments for a period of time, your government loan servicer could understand your situation and takes the necessary decision that better suits you;
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for subsidized student loans, no accumulation of interest while you are in school;
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your repayment plan is based on your income, it can go up to 25 years with a possibility of loan forgiveness;
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access to various forms of loan forgiveness and discharge.
Students, whether you consider taking a loan or consolidate the ones that you already have, remember to always seek first for the federal student loans.
Private Lenders
Sallie Mae
This lender offers the Smart Option Student Loan for both US and international students. Below is the student loan offers:
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Variable APR: 1.13% - 11.23%
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Fixed APR: 4.25% - 12.59%
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Your choice of a fixed or variable interest rate
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Multiple repayment options
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No origination fees
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No prepayment penalties
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Whether you're studying online or on campus borrow up to 100% of school-certified expenses for the entire school year
College Ave
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Variable: 1.04% - 11.98%
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Fixed: 3.49% - 12.99%
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Apply in as little as 3 minutes and get an instant credit decision
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Multiple repayment options from deferred to immediate principal and interest
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Choice of how long you take to repay the loan – 5, 8, 10, or 15 years
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0.25% interest rate reduction when you make required payments by automatic debit
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Borrow up to 100% of your cost of attendance (minimum $1,000)
Discover
Students who get at least a 3.0 GPA (or equivalent) may qualify for a one-time cash reward of 1% of the loaned amount on each new Discover undergraduate and graduate student loan. Undergraduate freshman borrowers may get an additional reward on their first loan if they earned at least a 3.0 GPA in high school and are US citizens or permanent residents.
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Variable APR: 1.13% - 11.23%
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Fixed APR: 4.25% - 12.59%
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Your choice of a fixed or variable interest rate
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Multiple repayment options
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No origination fees
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No prepayment penalties
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Whether you're studying online or on campus borrow up to 100% of school-certified expenses for the entire school year
SoFi
SoFi is the #1 student loan refinancing company in the nation, it can help students refinance their loans. Students could prequalify and check their rate within minutes without affecting their credit. SoFi’s no-fee loans are worth considering and students have to enroll half-time in school.
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Fixed interest rates starting at 2.99% APR* (with autopay) and variable rates from 1.88% to 11.66%.
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Loans from $5,000 up to 100% of the school-certified cost of attendance.
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Available to undergraduate students, as well as graduate students
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Accessible to non-citizen students who apply with a qualified cosigner.
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Easy to apply, no origination fees.
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Four repayment options to choose from while you’re in school and during your grace period: deferred fixed, interest-only, or full payments.
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Interest-rate reduction (0.25%) if you set up monthly payments by automatic debit, plus an additional discount (0.125%) if you or your cosigner are already a SoFi member.
Earnest
Earnest offers to students the freedom of choice. With Earnest, you can get your student loan or refinance with a company that knows you are more than a credit score.
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Fixed rates from 3.49% to 12.78% and variable rates from 1.05% to 11.44%.
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Loans from $1,000 up to 100% of the school-certified cost of attendance.
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Available to undergraduates and to graduate students.
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Accessible to non-citizen students who have a valid SSN and a creditworthy cosigner.
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No origination fees.
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Borrowers receive a nine-month grace period before entering repayment.
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Deferment is available for borrowers in the military.
Ascent
Ascent is a good private student loan for undergraduate and graduate students with or without cosigners. it offers a lot of options to students as well as interest rate reduction when students choose or sign up for autopay.
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Fixed rates from 3.39% to 14.50% and variable rates from 2.46% to 12.98%.
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Loans from $1,000 up to 100% of your school’s cost of attendance with an aggregate maximum of $200,000.
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Available to undergraduate and graduate students enrolled at least half-time.
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No application fee or prepayment penalty.
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0.25% of Interest-rate reduction when students automate their monthly payments.
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Receive a 1% cashback bonus upon graduation.
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Accessible to DACA students and non-citizen students who apply with a U.S. citizen or permanent resident cosigner.
Citizens Bank
Citizens Bank offers a multi-year approval to students to cover their whole college journey.
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Variable APR: 1.18% – 11.50%
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Fixed APR: 3.19% - 11.50%
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Your choice of a fixed or variable interest rate
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Multiple-year approval
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No origination fees.
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0.50% of Interest-rate reduction when students automate their monthly payments.
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Make full or interest-only payments while you are still in school
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Save with no application fees
Federal Student Loans
When it comes to financing student loans, there isn't too much problem to know time ahead how much your interest rate will be for the school year. Compare to the last three years, students now in 2020-21 are enjoying a very low interest rate in their loans.

*Source: U.S. Department of Education/Financial Student Aid
The federal student loans interest rate vary depending on the loan type. The table below provides interest rates for Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans first disbursed for the school year 2020-21.

*Source: U.S. Department of Education/Financial Student Aid
Students can count on the U.S. Department of Education for a fixed rate on their federal student loans for the life of the loan.