Types of Student Loan Programs

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.

Before we were given a wide variety of federal loan programs to choose from, we had the original William D. Ford Federal Direct Loan Program (known simply as the Direct Loan Program), which helped to provide students and families with the possibility to help pay for their further education. Rather than having to find a bank that would offer financial aid to incoming students, sometimes being at a high rate, this option made the new lender the U.S. Department of Education, even letting you qualify for loan forgiveness. Alongside this type of student loan program, other federal student loan options were created. Perkins Loans list the school as the lender, even though they are still federal. FFEL (Family Federal Education Loan) was funded by private banks but has been outlawed since 2010. Parent Plus Loans are similar to typical student loans but are taken out by the parent, making them completely liable for these loans.

Before we were given a wide variety of federal loan programs to choose from, we had the original William D. Ford Federal Direct Loan Program (known simply as the Direct Loan Program), which helped to provide students and families with the possibility to help pay for their further education. Rather than having to find a bank that would offer financial aid to incoming students, sometimes being at a high rate, this option made the new lender the U.S. Department of Education, even letting you qualify for loan forgiveness. Alongside this type of student loan program, other federal student loan options were created. Perkins Loans list the school as the lender, even though they are still federal. FFEL (Family Federal Education Loan) was funded by private banks but has been outlawed since 2010. Parent Plus Loans are similar to typical student loans but are taken out by the parent, making them completely liable for these loans.

Different Types of Student Loan Programs

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:

 

ICR: Income Contingent Repayment Program


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.

IBR: Income-Based Repayment Program


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.

PAYE: Pay As You Earn Program


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.

REPAYE: Revised Pay As You Earn Program


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.

For more information on the various types of student loan programs and how to choose the right option for you, contact Hope Credit today. We look forward to helping you!

 

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