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Government Loans: Finding The Right One For You

The US government has a broad range of programs designed to give financial assistance to Americans in need. Some of these programs provide direct grants where the government gives you money, but far more involve loans. Whether you need to pay for college, start a new business, or fix a house after a flood, the government is there to lend money. If you need cash now for your business, to recover from disaster, or to address some other need, you may qualify for one of these programs.

Government loans may come directly from a government agency, or from a private lender with a government program underwriting it or providing insurance to protect the lender from default. Either way, they usually have lower interest rates, and easier approval standards than private lenders will offer. Many of these have specific requirements, as the government intends them only for particular situations or groups (e.g., housing support for Indian veterans). You need to check whether your situation qualifies under the requirements of a particular program. If you fit within the parameters for one of these government lending programs, you might be able to achieve the dream of starting a business, buying a home, paying for college, or much more.

For Students
The federal government offers loans for students. Some of these programs will lend you money for college, while some will help reduce student debt in exchange for service in specific fields after graduation.

These are the general student lending programs.

Direct PLUS
These unsubsidized loans cater either to the students' parents or students themselves, covering the student's tuition and boarding costs minus other financial aid. The interest rates are variable but always less than 9%.

Federal Perkins Program
Schools offer the Perkins program as a fixed rate loan based on the availability of funds and the need of the borrower. Up to $5,500 is available for undergrads, payable at 5% interest. These loans are payable nine months after you leave school or drop below half-time enrollment. The school might partially, or even entirely, waive the need to repay if you undertake certain public, teaching, or military service jobs after graduation.

Education Loan Consolidation
The Education Loan Consolidation program provides a refinancing option consolidating other forms of government student debt that students have incurred. It does not cover Direct PLUS Loans made to a student's parent.

The government needs doctors and nurses, especially in certain fields. If you are a nurse, doctor, or health professional pursuing further medical education, you may be eligible to have portions of your student debt waived in exchange for a service commitment, generally two years in specific fields or locations. These programs don't involve lending but help to forgive existing student debt. So check out the requirements and see if you can reduce your student debt and probably serve some people in need at the same time.

Nursing Education Loan Repayment Program

Clinical Research Loan Repayment Program for Individuals from Disadvantaged Backgrounds

Contraception and Infertility Research Loan Repayment Program

National Institutes of Health Loan Repayment Programs

AIDS Research Loan Repayment Program

Extramural Clinical Research Loan Repayment Program for Individuals from Disadvantaged Backgrounds

National Institute on Minority Health and Health Disparities (NIMHD) Loan Repayment Program

Indian Health Service Loan Repayment Program

Clinical Research Loan Repayment Program

Pediatric Research Loan Repayment Program

Whether you're a student, a parent trying to pay your child's college tuition, or even a graduate already working in your chosen field, these programs help grant crucial access to higher education and critical relief from student debt.

Borrowing for Business
The government offers several programs to support businesses, covering expenses from start-up costs to disaster recovery. Some of these loans apply to specific groups of people, for example, veterans and Native Americans. However, there are also programs available to the public. Here are some examples:

7(a) Small Business Loan

The Small Business Administration (SBA) lends to for-profit small businesses. If your business fits the size requirements, you can demonstrate your ability to repay the money, and you cannot get financing elsewhere, you may qualify. Financing under the program can be up to $2 million and extend to 7 years for capital and 25 years for real estate.

Microloan Program

Local non-profit lenders offer micro-loans underwritten by the Small Business Administration. These are collateral-backed amounts under $50,000 with variable interest suitable for covering start-up costs for small businesses. The local lender determines the terms and qualifications.

Equity Investment - Small Business Investment Company (SBIC) Program
The Small Business Investment Company (SBIC) Program is a venture capital group underwritten by the Small Business Administration, which can provide capital, long-term lending, and management assistance. The SBIC invests in your company, paying you money and securities in exchange for partial ownership.

There are many SBICs, some of which specialize in specific types of business or work with disadvantaged business owners. Your SBIC is your partner, and it's important to choose the best one for your business' long-term growth. Get a list of the SBICs in your state and shop around for the best partner you can find, paying special attention to both the monetary investment and experience that they can offer you as potential partners in your business. If a declared disaster affects your organization and causes physical or economic losses, you may qualify for the following programs:

Economic Injury Disaster

If a declared disaster hits your business or non-profit and causes either damage or economic losses, this SBA program can help you recover from your loss. Qualified businesses can borrow up to $2 million.

Business Physical Disaster

If your business or private non-profit suffers physical damage due to a declared disaster, you may qualify for this loan. For organizations that can't find any other financing, interest is offered at 4%, up to 30 years, while organizations with other financing options pay 8%. Qualified businesses can borrow up to $2 million.

Emergency Farm

If you have a farm in a declared disaster county, you can borrow up to $500,000 for 20, 30 or even 40 years. This money can be used to repair or replace property, pay production costs for the disaster year, pay for essential family expenses, re-organize the farming operation, or refinance pre-existing debts. There are also more specific programs for particular groups and situations. You need to check whether you qualify under each program's eligibility criteria before you apply.

Short Term Lending Program

If your business has a Department of Transportation contract, you may qualify for a line of credit under $750,000, extending for one year and renewable for five years.

Business and Industrial Loans

If your business or organization employs people and promotes the economy or environment, conserves water for aquaculture, and promotes renewable energy in a rural area, you may qualify for Business and Industrial loans. Individual lenders set the terms, offering up to $10 million.

Certified Development Company (CDC) (504) Program

This program offers long-term fixed-interest borrowing for small businesses in need of major equipment or real estate.

Indian Loan Guaranty, Insurance, and Interest Subsidy Program

This program is for businesses with majority Native American ownership that provide economic development in or near a Native American community.

Military Reservist Economic Injury Disaster Program

This program covers ordinary and necessary expenses in small businesses where an essential employee was called up to active military duty. The program lends up to $2 million for 30 years, at 4% interest.