Federal student loans is money borrowed for higher education that must be repaid with interest must repay with interest. The loans can be used for education related expenses including tuition, room and board, and textbooks. A federal student loan gives parents and their child the opportunity to borrow funds to aid in paying for their education through government supported loan programs. The low interest federal student loans give students the option of a flexible repayment program once they graduate from college. Besides a low fixed interest rate, other benefits include income based repayment plans, loan forgiveness for certain employment, and deferment if a student is unemployed or returning back to school. These are some of the reasons that college students and their parents should always rely on federal student loans before turning to private student loans.
There are five types of federal student loans including Federal Perkins Loan, Direct Subsidized Stafford Loan, Direct Unsubsidized Stafford Loan, Direct PLUS Loans for Parents, and Direct PLUS Loans for Graduate and Professional Students. In the Direct Loan Programs, the US government becomes the lender, and the loan funds are provided to students through their respective college.
Federal Perkins Loan
- Your school is the lender
- Payment is made to the college that supplied the loan
- For both undergraduate and graduate students
- Interest rates is 5% for the loan
- Amount of funds depend on a student’s financial need and funds available at the college
- Undergrads borrow limit is $5,000
- Graduates borrow limit is $8,000
Direct Subsidized Stafford Loan
- Must be at least half time student
- Demonstrate financial need
- Undergraduates or Graduate students
- Interest not charged while in school, grace and deferment periods
- Borrowing limits between $3,500 and $8,500
Direct Unsubsidized Stafford Loan
- Must be at least half time student
- Demonstrate financial need
- Undergraduates or Graduate students
- Interest of 6.8% is charged while in school, grace and deferment periods
- US government is lender
- Borrowing limits between $5,500 and $20,500 less subsidized student loans
Direct PLUS Loans for Parents
- For parents of dependent student
- Cannot have negative credit history
- Interest of 7.9% is charged
- US government is lender
- Max borrowing limits is cost of attendance less other financial aid received
Direct PLUS Loans for Graduate Students
- For graduates and professional degree students
- Cannot have negative credit history
- Interest of 7.9% is charged
- US government is lender
- Max borrowing limits is cost of attendance less other financial aid received
How do I apply for federal student loans?
Students that wish to receive federal student loans must complete and submit a Free Application for Federal Student Aid (FAFSA). After the application is processed, your college will review the data and let you know your loan eligibility status via a letter by mail. At this point, students can apply for all applicable federal student loans. Also, note that federal loans require reapplication every year since a student’s financial status may have changed. For more information on the financial aid process, please visit http://www.fafsa.ed.gov.
Determining how much federal student loans you can borrow
The amount of money that students can borrow depends on several factors including expected family contribution, grade level, and student status. Expected family contribution is the amount that the government determines that your family can contribute towards higher education based on the data students provide in their FAFSA. As for the grade level, the higher the grade the more money students can receive. Also, student status can affect the amount of loan because independent students cannot contribute as much as a dependent one.
View video for more information on getting federal student loans: