The federal loan programs offer several benefits that are guaranteed by law and, in many cases, not available or attainable through a private loan program. You should ultimately always refer to the Department of Education’s Student Aid on the Web page for the most updated and detailed information regarding the terms, benefits and repayment options on federal loans. Below is a brief summary of benefits.
You will have achievable terms and a reliable, stable source of funding through the government along with one Department of Education servicer who will never sell your loan to a third party.
Federal loans qualify for deferments and forbearance options as well as death and disability provisions.
- Deferment is a postponement of payment on a loan that is allowed under certain conditions such as enrollment in a degree seeking program. No payment would be required while in deferment. Many private lenders offer deferment but it is usually only for 6 or 9 months after you have withdrawn or graduated from an institution. If you were to enroll in another program, your private loan would not defer again.
- Forbearance is a postponement of payment on a loan, typically if the borrower doesn’t qualify for a deferment and is unable to make payments for a reason such as poor health or unemployment. Even though interest continues to accrue during forbearance, using forbearance does not adversely affect your credit history. Your loan will remain in “good standing” and avoid default by using this benefit. You are eligible for up to 36 months of forbearance on all federal loans during the entire period of repayment. While some private loan lenders offer a forbearance provision, a student’s ability to obtain a forbearance is often difficult and only available for a period of 6 months. Also, private lenders may change the terms upon which forbearance is granted at any time.
- Death and Disability provisions ensure that upon death or total and permanent disability the federal loans will be discharged and the student will no longer be obligated to repay their loans. Private loans are not automatically discharged upon death or total and permanent disability. Private lenders would either collect from the student’s estate or, if a co-applicant is present, the co-applicant. The loan would be discharged by the private lender only after the co-applicant and the student’s estate had both been unsuccessfully sought for payment.
Additionally, Perkins loans have cancellation and postponement provisions for students who are going into jobs that qualify for federal loan cancellation, such as Law Enforcement (District Attorney), Nonprofit Family Service Agency, U. S. Armed Forces in hostile area, or Peace Corp/Vista.
You do not need to submit a separate application through a lending agency. Your FAFSA is your application for Perkins and Direct Stafford loans and the Direct GradPLUS Loan program can easily be submitted to our office for processing by submitting your application to the Department of Education via our Direct GradPLUS web site.
Some private lenders may offer “borrower benefits” such as fee subsidies or repayment incentives that can make their loans less costly than Direct Loans if you meet a variety of repayment conditions. Lenders have reported to us that a small number of student actually obtain these benefits; some students miss a scheduled payment during the first years of repayment in which the benefit is contingent upon while others site that many HLS graduates pay their loans off early before qualifying for the benefits. You should consider whether or not you will be in repayment long enough to receive the repayment incentives.