Before a variety of federal loan programs existed, the William D. Ford Federal Direct Loan Program (Direct Loan Program) provided students and families with funding for education. Instead of relying on private banks with high rates, the U.S. Department of Education became the lender, offering benefits like loan forgiveness. Other federal options included Perkins Loans, with schools as lenders, and FFEL loans, funded by private banks but discontinued in 2010. Parent PLUS Loans are taken by parents, who are fully liable for repayment.
Today, there are several different options for federal student loan programs. Choosing the right program might seem difficult, but Hope Credit can help you to choose the right option for you.Since the original student loan programs, many different options became available depending or your needs and what you were capable of handling. These types of student loan programs include:
This type of student loan program began in 1994 and has a repayment plan that requires monthly payments that are the lesser of, either, what you would expect to pay with a fixed monthly plan over 12 years, or 20% of your discretionary income, divide by 12. This program lasts for a maximum of 300 months.
First beginning in 2007, this style of student loan program is variable depending on your household’s income and can fluctuate with payments as low as $0 per month. This is usually 10% of your discretionary income, but never more than what you would pay with a 10-year standard repayment plan.
This option began in 2011 and allowed recently graduated students to have a variable loan payment plan. Rather than setting you at a price from the beginning, this plan allows you to pay as you earn. When you first enter the workforce, your payments may be low but will gradually increase as you begin to earn more.
As a revision to the original PAYE loan program, this version was finalized in 2015 and ensures that your federal loan repayments are capped at 10% of your discretionary interest, and even goes to forgive the remaining balance after 20 or 25 years.
