Types of Federal Loan Programs
There are four basic Federal student loan programs that you
should be aware of: Perkins, Stafford, PLUS and consolidation loans.
Perkins Loans
Stafford Loans
PLUS Loans
Consolidation Loans
Perkins Loans
These loans are offered to students with the most financial need;
however, this loan is not available at all schools
- Interest rate is fixed at 5 percent.
- While in school, you are not required to make any
payments.
- After leaving school, you have a 9-month grace
period before repayment begins.
- Maximum amount you can borrow each year is
$4,000.
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Stafford Loans
These loans are offered to students and are available in two forms: subsidized
and unsubsidized.
The subsidized Stafford loan has a fixed interest rate of 6 percent, and the
unsubsidized Stafford loan has a fixed interest rate of 6.8 percent as of July
1, 2008. You also have a 6-month grace period in which to pay back the loan
after you graduate or are no longer enrolled at least half-time.
The
Stafford loan limits
have increased for those loans first disbursed on or after July 1, 2008.
For subsidized loans:
- Eligibility determined on the basis of need.
- Interest is paid by the Federal government during
the grace period, deferment period, and until the student ceases to
be enrolled at least half-time at an eligible institution.
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For unsubsidized loans:
- Eligibility is not determined on the basis of
financial need. Regardless of income, you can obtain this loan.
- Interest is not paid by the Federal government,
so you are responsible for all interest payments.
- Interest and principal may be deferred during
in-school periods.
- You have the option of making interest payments
while in school or having the interest deferred.
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PLUS Loans
These loans are offered to parents to help them pay for their children's
education. These loans are also offered to graduate and professional students.
Parents and graduate and professional students must pass a credit check to be
eligible for these loans.
In addition to the credit check, graduate and professional students also need to
apply for the maximum amount of a Stafford loan before taking out a PLUS loan.
- You can borrow up to the cost of attendance at
the desired school minus any other financial aid received.
- Interest rate is fixed at 8.5 percent for all
loans with a first disbursement after July 1, 2006.
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Consolidation Loans
Consolidation loans allow you to combine all of your federal student loans into
a single new loan after you graduate or leave school.
This can be a great way to simplify repayment since you'll only make one monthly
payment to one lender. Also, your payments can be considerably lower because the
payback terms can be much longer.
On the other hand, increasing the amount of time you have to pay back your loans
means you'll pay more interest over time.