Student loans are provided by the Federal government and private lenders in order to encourage the younger generation to improve their quality of life by pursuing higher education. The Federal govt. provides Stafford Loans and Parent PLUS Loans under the Federal Family Education Loan (FFEL) Program and Federal Direct Loan Program. Direct loans, as the name suggests, can be obtained directly from the Federal government. On the other hand, FFEL loans are provided by banks, credit unions and other lenders participating in the FFEL program. The Parent PLUS loans are offered to parents who are willing to fund their child’s education. In addition to these loans, Federal Perkins loans are offered to deserving students who are unable to afford the interest payments on Stafford loans. Perkins loans are meant to cover the cost of post secondary education and are provided by schools participating in the Federal Perkins Loans Program. These loans carry a low rate of interest.

Student loans are typically designed to facilitate easy repayment. The terms and conditions of repayment are generally favorable to the students. However, recession has resulted in a slump in the job market. Loans that could have previously been paid off in easy installments have now reached the stage of default. Considering this, the Federal government has introduced a new student loan forgiveness program for Federal Direct loans. This is in addition to the already existing Federal Loan Forgiveness Programs for Stafford, Perkins and PLUS loans. Forgiveness programs are not applicable to defaulted loans. Read the rest of this entry »