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Introduction 
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PAIS Calculator
Scholarship Search
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The federal government runs two major loan programs for education: the Federal Family Education Loan Program and the William D. Ford Federal Direct Loan Program. Both offer subsidized and unsubsidized student loans and PLUS loans for parents. The main difference between the two programs is the source of loan funds. Both loan programs offer the same loan limits and benefits. Repayment options for the two programs differ slightly. Some colleges offer both loan programs, but you may borrow under only one program at a time. Federal Family Education Loans Loans provided under the Federal Family Education Loan Program (FFELP) are made by banks, credit unions and other commercial lenders, guaranteed by guaranty agencies and backed by the federal government. For more information, see your financial aid advisor or go to www.edfund.org. Federal Direct Loans For Federal Direct loans, the federal government is both the lender and guarantor. To learn more, contact your financial aid administrator or visit www.ed.gov/offices/OSFAP/DirectLoan/index.html. The information on federal Stafford and PLUS loans that follows applies to both FFELP and Direct Loans. Federal Stafford Loans Federal PLUS Loans for Parents Private Loans Student Loan Interest Deduction Creating Your Financial Plan Federal Stafford Loans Federal Stafford loans are the most common form of self-help aid for undergraduate, graduate, vocational and professional students and may be used at all types of schools. Like all loans, Stafford loans must be repaid, with interest. You must be enrolled at least half time to be eligible for a Stafford loan. Subsidized Stafford Loans Subsidized Stafford loans are awarded based on demonstrated financial need. The federal government pays the interest while you're in college and for the first six months after you graduate, leave school or drop below half-time enrollment. If you receive a deferment on your loan, the government also pays your interest costs. To qualify, you must meet all the requirements for federal student financial aid. You must also have had your eligibility for a Pell Grant determined. Unsubsidized Stafford Loans Unsubsidized Stafford loans are for all eligible students, regardless of income or assets. You must meet the same requirements as those for a subsidized Stafford loan, except for demonstrating financial need. You're responsible for paying all the interest on the loan, but you can allow it to accumulate while you're in college and during the grace period. If you do, the interest will be capitalized at repayment. When interest is capitalized, it's added to the amount you borrowed and any future interest will be based on the higher loan amount. It's to your advantage to pay the interest while you're in college. This way, you'll pay less in the long run. What's more, the interest you pay may be tax deductible. How much can I borrow? The amount you can borrow largely depends on your college costs, your expected family contribution, your year in school, your enrollment status, how much other financial aid you receive — including private aid — and whether you're a dependent or an independent student. Your Stafford loan, plus any other financial aid you've received, cannot be more than your college costs. In addition, you must be enrolled for a minimum period of time, depending on the type of college, to receive funds. Click here for a summary of "  How Much Can I Borrow?"
What's the interest rate? The interest rate is variable, but it can't go higher than 8.25 percent. The rate is adjusted each year on July 1. What about other fees? Origination and insurance fees of up to 4 percent may be deducted proportionally from each disbursement. Also, if you don't make your payments on time, you may be charged late fees or collection costs. (You'll pay no insurance fees on Stafford loans guaranteed through EDFUND through at least September 30, 2006.) How do I apply? To apply, you must file the FAFSA. Your college will tell you if you qualify for an unsubsidized or a subsidized loan, or both. When do I have to repay my loan? After graduating, leaving school or enrolling less than half time, you'll have a six-month grace period before your first loan payment is due. You can choose your repayment plan. Typically, you'll have up to 10 years to repay. How do I get my loan? After signing a master promissory note, your loan funds will be sent directly to your college. At some schools, first-year students who are also first-time borrowers may not receive their first loan disbursement until 30 days or more after classes begin, so you shouldn't plan on using your loan to pay expenses or fees due early in the academic year. What if I have trouble paying my loan? Let your lender know right away if you can't make your payments. If you fall behind in your payments, your delinquency most likely will be reported to a national credit agency, which could damage your credit rating, making it harder and more expensive if you want to finance a car, home or more education later. If you're having trouble repaying your loans, you may want to change your repayment plan, consolidate or combine your loans, or look into a deferment or forbearance to temporarily postpone, reduce or extend your payments. Additional Unsubsidized Stafford Loans Additional unsubsidized Stafford loans may be awarded to help cover any remaining unmet need or to replace some of your expected family contribution if you're an independent student. Federal PLUS Loans for Parents Parent Loans for Undergraduate Students (PLUS) enable your parents or stepparents to borrow money for your college costs. PLUS loans are not based on your family's income or assets and are only for undergraduate study. These loans are always unsubsidized. How do my parents qualify for a PLUS loan? To qualify, you and your parents must meet the requirements for federal financial aid and you must be a dependent student. You must also file the FAFSA. In addition, your parents must pass a credit check. Generally, they must not have any outstanding tax liens or judgments, delinquent or defaulted loans or extensive credit card debt, or any bankruptcy, foreclosure or wage garnishment within the past five years. If your parents don't pass the credit check, they may still be able to receive a PLUS loan if they know someone who is able to pass the credit check and is willing to cosign their loan. Or you may want to apply for an unsubsidized Stafford loan. To learn more, contact your college's financial aid office. How much can they borrow? Your parents can borrow up to the total cost of your education each year, minus any other aid you may receive. What's the interest rate? The interest rate is variable, adjusted each July 1, with a cap of 9 percent. Interest accrues from the date loan funds are first disbursed until the loan is repaid in full. What about other fees? Origination and insurance fees of up to 4 percent may be deducted from each disbursement. (There's no insurance fee on PLUS loans guaranteed through EDFUND through September 30, 2006. You receive the 1 percent savings up front.) Also, if your parents don't make their payments as scheduled, they may be charged late fees or collection costs. How will my parents receive the loan funds? PLUS loan funds are delivered directly to your college. Your college will then forward all loan funds — over and above the charges owed to the college — to your parent. When do my parents begin repaying their loan? There is no grace period for PLUS loans. Generally, repayment starts within 60 days of the loan's final disbursement for the school year, so your parents may be repaying both the loan and the interest while you're still in college. Your parents can select from a range of flexible repayment plans. What if I have trouble paying my loan? Yes. If your parents are having difficulty repaying their loan, they may want to consider changing repayment plans. If they have more than one PLUS loan, they may consider loan consolidation or loan combination. Under certain circumstances, your parents may be eligible for a deferment or forbearance, where payments are reduced or postponed for up to three years. Because all PLUS loans are unsubsidized, interest will accrue during periods of deferment or forbearance. Federal Perkins Loans Perkins loans are very low-interest loans for undergraduate and graduate students with exceptional financial need. What's the interest rate? The interest rate on Perkins loans is fixed at 5 percent, but 0 percent while you're enrolled at least half time. You must begin repaying your loan nine months after you graduate, leave school or enroll less than half time. What about other fees? There are no other fees. However, if you miss a payment, make a late payment or make less than a full payment, you may have to pay late charges. You may also have to pay collection costs if you don't repay your loan as required. How much can I borrow? Depending on when you apply, your financial need and the available funds, you can borrow up to $4,000 for each year of undergraduate study and up to $6,000 a year if you're a graduate or professional student. In all, you can borrow up to $20,000 for undergraduate study and as much as $40,000 for graduate or professional study, including any Perkins loans you borrowed for your undergraduate studies. Perkins loan funds are usually very limited, however, so few students receive the top award amounts. How do I receive my Perkins loan? Your college is the lender. The interest rate is fixed at 5 percent. There are no fees. You'll pay no interest on your Perkins loan while you're enrolled at least half time, and you must begin repaying your loan nine months after you graduate, leave school or enroll less than half time. Depending on how much you borrow, you may have up to 10 years to repay. When do I pay back my Perkins loan? If you're attending college at least half time, you have nine months after you graduate, leave school or drop below half-time enrollment before you must begin repayment. Your monthly payment will depend on the amount of your debt and the length of repayment. Private Loans Private loans can help you or your parents pay your college bills if you're still short after exhausting federal, state, college and private student aid. Private loans usually carry higher interest rates and fees than federal loans and typically are based on credit. Your parents may also want to consider a home equity loan or line of credit. Be sure you understand all the terms and conditions before applying for or accepting any loan. Student Loan Interest Deduction You may be able to deduct up to $2,500 in interest paid on your student loans each year for the life of the loans. You may deduct interest paid on student loans you received for your own education or for your spouse's or child's education. Parents cannot deduct interest paid on a student loan taken out by their child, even if they're paying the interest costs. This tax credit also has income limitations. The federal government offers several other tax benefits. |
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