Federal Student Loans are loans offered to eligible students of higher education by the Department of Education. They are often considered to be preferable to private loans because they typically have lower fixed-interest rates, flexible repayment options and other benefits.
To find out which loans you qualify for, you should fill out the Free Application for Federal Student Aid (FAFSA) between January 1 and April 1 prior to enrollment. The three most common types of Federal Student Loans for MBAs are explained below.
A Direct Subsidized Stafford Loan is a loan offered by the Department of Education to students who demonstrate financial need and meet other eligibility requirements, like at least half-time enrollment and U.S. Citizenship. Some non-citizens are eligible, and you should check with your financial aid department for details. The major advantages of the Subsidized Stafford loans are the fixed interest rate and postponement of interest until six months after the leaving school.
Subsidized Stafford Loans have been discontinued for 2012-2013.
Direct Unsubsidized Stafford Loans are much like subsidized loans, though with two major differences: The loans are not awarded on the basis of need and interest begins to accrue as soon as the funds are received. You will want to borrow the maximum amount you qualify for in subsidized loans before taking out any unsubsudized loans, however the 6.8% fixed interest rate still makes the unsubsidized loan a useful option.
The Direct Graduate PLUS Loan is a federal student loan awarded on the basis of credit, rather than need. The loan accrues interest while the student is in school but payment can be deferred until after graduation. While this loan may allow students to take out money for living expenses, cost of attendance maximums are set by the institution.
Making Use of Your School’s Financial Aid Department
It is important to remember that if you have questions about the FAFSA process or about financing your education in general, you get in touch with your school’s Financial Aid Department. They should be able to help you understand the borrowing options available to you, as well as helping you to figure out appropriate repayment plans.