Loan Programs

To apply for a federal student loan, you first must file the FAFSA. In addition, each loan has its own application and promissory note.

Federal Family Education Loan Program

Qualified students and their parents can borrow Stafford and PLUS loans for college costs under the Federal Family Education Loan (FFEL) Program. There are also Consolidation loans, which allow students to refinance existing loans to make loan management and repayment easier. Check with your school to determine availability.

These loans are guaranteed by guaranty agencies such as EDFUND and backed by the federal government. The loans are made by banks, savings and loans, and credit unions. For a list of lenders, contact your financial aid office.

Federal Direct Loan Program

The William D. Ford Federal Direct Loan Program consists of Direct Stafford subsidized and unsubsidized loans, Direct PLUS loans and Direct Consolidation loans. For Direct Loans, the federal government provides the funds directly to schools. The schools then disburse the money to the students. Check with your school to determine availability.

Stafford Loans

Stafford loans are the most common source of student loan funds and are for undergraduate, graduate, vocational and professional students. There are two types: subsidized and unsubsidized. The FAFSA will establish your eligibility for both. In addition, the Stafford loan has its own separate application and Master Promissory Note.

Subsidized Stafford Loans

Subsidized Stafford Loans are need-based. The federal government pays the interest on the loan while you're in school, during the grace period before repayment begins, and during periods of approved deferment. Monthly payments begin six months after you graduate, drop below half time or withdraw from school.

To qualify for a subsidized Stafford loan, you must meet all the requirements for federal student financial aid. You also must have had your eligibility for a Pell Grant determined.

Unsubsidized Stafford Loans

Unsubsidized Stafford Loans may be taken out by all qualified students, regardless of their income or assets. You must meet the same requirements as those for subsidized Stafford loans, except you don't have to demonstrate financial need. Interest accrues from the time the loan is disbursed, and interest payments begin immediately but can be deferred. It's to your advantage, however, to pay the interest while you're in school. This way, your debt will be the principal amount only when you start repayment.

The interest rate on new Stafford loans is 6.8%. For loans taken out prior to July 1, 2006, the interest rates are variable and adjusted annually. Any origination and other fees are deducted proportionately at the time of disbursement. Unless you qualify and opt for an alternative repayment plan, you must repay Stafford loans within 10 years. Lenders offer standard, graduated and income-sensitive repayment plans.

Your loan funds will be sent to your school in two or more payments and released to you after your enrollment and academic progress have been verified. If you're a first-year student, your first loan disbursement could be made up to 30 days after classes begin.

Federal PLUS Loans

There are two types of PLUS loans: one for parents or stepparents of a dependent student, and one for graduate/professional students. PLUS loans are not based on family income or assets, and they must be repaid even if the education is not completed. With a good credit history, you or your parents can borrow up to the total cost of your education, minus any other aid for which you are eligible.

The interest rate on PLUS loans is 8.5 percent. Origination and federal default fees may also be deducted. Schools process loan using varying methods; check with your financial aid office for procedures and instructions. The PLUS loan has its own separate application and master Promissory Note.

Interest begins to accrue immediately, and repayment starts within 60 days of the loan's last disbursement. Graduate and professional students may request that payments be deferred while they are in school.

To qualify for a parent PLUS loan, you must meet the requirements for federal financial aid. Your parents also must meet some of these general requirements. The PLUS loan has its own separate application and Master Promissory Note. To qualify for a graduate and professional PLUS loan, students must also complete a FAFSA.

Perkins Loans

Federal Perkins loans are very low-interest loans made through participating schools for students with financial need. The interest rate at repayment is fixed at 5 percent and there are no fees.

You'll pay no interest while you're enrolled in school at least half time, and payments begin nine months after you graduate, leave school or drop below half-time enrollment. Depending on the size of the loan, you'll have up to 10 years to repay.

The annual loan limit is $4,000 for undergraduate students and $6,000 for graduate students. The aggregate loan limits are $20,000 for undergraduate study leading to a bachelor's degree, $40,000 for graduate or professional students and $8,000 for all other students.