Student loans, unlike grants and work-study, are borrowed money that must be repaid, with interest, just like car loans and mortgages. Cannot have these loans canceled because you didn’t like the education you received, didn’t get a job in your field of study or because you are having financial difficulty.
Federal loan programs change occasionally so for the most up to date information about federal loan programs and other federal student financial aid programs you should visit the U.S. Department of Education’s website at www.federalstudentaid.ed.gov.
Perkins loans are made through participating schools to undergraduate, graduate and professional degree students. In order to obtain a Perkins loan you must be able to demonstrate financial need, and be enrolled as a full-time or part-time student. Perkins loans are repaid to your school.
Loan amounts are up to $4,000 a year with a maximum aggregate loan amount of $20,000 for undergraduate students and up to $6,000 a year with a maximum aggregate amount of $40,000 (including any undergraduate loans) for graduate students. The amount actually received depends on financial need, the amount of other aid that has been awarded and the availability of funds at the school. The interest rate on the loans is 5% and students can take up to 10 years to repay the amount owed.
Stafford Loans
Stafford loans are for undergraduate, graduate and professional degree students. You must be enrolled as at least a half-time student to be eligible for a Stafford Loan.
There are two types of Stafford: subsidized and unsubsidized. You must have financial need to receive a subsidized Stafford loan. Financial need is not required to obtain an unsubsidized Stafford Loan. The federal government will pay (subsidize) the interest that accrues on subsidized Stafford Loans during certain periods of your education.
Stafford loans are made through one of two U.S. Department of Education programs.
1. William D. Ford Federal Direct Loan Program
Loans made through this program are known as Direct Loans. Eligible students and parents borrow directly from the U.S. Department of Education at participating schools. Direct Loans include both subsidized and unsubsidized Stafford Loans (also known as Direct Subsidized Loans and Direct Unsubsidized Loans), Direct PLUS Loans and Direct Consolidation Loans.
The interest rate on Direct Loans is 6.8%. The federal government pays the interest on subsidized loans during school and certain other periods. The borrower pays all interest on unsubsidized loans. Students can take between 10 and 25 years to repay the loans depending on the amount owed and the type of repayment plan that is selected.
2. Federal Family Education Loan Program (FFEL).
Loans made through this program are referred to as FFEL Loans. Private lenders provide funds that are guaranteed by the federal government. FFEL Loans include subsidized and unsubsidized FFEL Stafford Loans, FFEL PLUS loans and FFEL Consolidation loans.
The interest rate on FFEL Loans is 6.8%. The federal government pays the interest on subsidized loans during school and certain other periods. The borrower pays all interest on unsubsidized loans. Students can take between 10 and 25 years to repay the loans depending on the amount owed and the type of repayment plan that is selected.
The lender is usually a bank or credit union or other participating private lender. Borrowers repay the loan to the lender.
PLUS Loans
PLUS loans (Direct or FFEL) are loans made to parents to help pay the cost of education for their dependent undergraduate or graduate children. In addition, graduate and professional degree students may obtain PLUS loans to help pay for their own education. Students must be enrolled at least half-time.
The amount that can be borrowed is the student’s cost of attendance less other aid received by the student. The interest rate is 8.5% for FFEL PLUS loans and 7.9% for Direct PLUS loans. The borrower pays all the interest. Students can take between 10 and 25 years to repay the loans depending on the amount owed and the type of repayment plan that is selected.
Consolidation Loans
Consolidation Loans (Direct or FFEL) allow student or parent borrowers to combine multiple federal education loans into one loan with one monthly payment
