While included in the term “financial aid,” higher education loans differ from scholarships and grants in that they must be paid back. They come in several varieties in the United States:
* Federal student loans made to students directly: No payments while enrolled in at least half time status. If a student drops below half time status, the account will go into its 6 month grace period. If the student re-enrolls in at least half time status, the loans will be deferred, but when they drop below half time again they will no longer have their grace period. Amounts are quite limited as well. There are many deferments and a number of forbearances one can get in the Direct Loan program.[1] For those who are disabled, there is also the possibility of 100% loan discharge if you meet the requirements.[2] Due to changes made by the Higher Education Opportunity Act of 2008, it will become much easier to get one of these discharges as of July 1, 2010.[3] There are loan forgiveness provisions for teachers and health professionals serving low-income areas. Currently, certain loan forgiveness or discharges are considered income by the Internal Revenue Service due to 26 U.S.C. 108(f).[4]
* Federal student loans made to parents: Much higher limit, but payments start immediately
* Private student loans made to students or parents: Higher limits and no payments until after graduation, although interest will start to accrue immediately. Private loans may be used for any education related expenses such as tuition, room and board, books, computers, and past due balances. Private loans can also be used to supplement federal student loans, when federal loans, grants and other forms of financial aid are not sufficient to cover the full cost of higher education.
* Federal student loans made to students directly: No payments while enrolled in at least half time status. If a student drops below half time status, the account will go into its 6 month grace period. If the student re-enrolls in at least half time status, the loans will be deferred, but when they drop below half time again they will no longer have their grace period. Amounts are quite limited as well. There are many deferments and a number of forbearances one can get in the Direct Loan program.[1] For those who are disabled, there is also the possibility of 100% loan discharge if you meet the requirements.[2] Due to changes made by the Higher Education Opportunity Act of 2008, it will become much easier to get one of these discharges as of July 1, 2010.[3] There are loan forgiveness provisions for teachers and health professionals serving low-income areas. Currently, certain loan forgiveness or discharges are considered income by the Internal Revenue Service due to 26 U.S.C. 108(f).[4]
* Federal student loans made to parents: Much higher limit, but payments start immediately
* Private student loans made to students or parents: Higher limits and no payments until after graduation, although interest will start to accrue immediately. Private loans may be used for any education related expenses such as tuition, room and board, books, computers, and past due balances. Private loans can also be used to supplement federal student loans, when federal loans, grants and other forms of financial aid are not sufficient to cover the full cost of higher education.
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