Education For Success
Student Loans Article
Federal Education Loan Programs
Kyle BesserEligibility for federal student loans, except the Federal PLUS loan and unsubsidized Federal Stafford Loan, is primarily based on financial need. Families demonstrate need for federal student aid by completing and filing the Free Application for Federal Student Aid (FAFSA).
The FAFSA is the first step in applying for federal aid offered by the U.S. Department of Education. The FAFSA is available from colleges, high school guidance counselors, public libraries and the internet. Only one FAFSA needs to be completed each year, even if you are considering several different colleges.
The U.S. Department of Education is in the process of phasing out the paper FAFSA and recommends that students complete the FAFSA online. The FAFSA web site has everything you need to know about completing and filing the FAFSA and sending your completed FAFSA to the schools you want to apply to. You may be able to use the FAFSA to apply for state aid and aid through your college as well.
Federal Perkins Loan
The Federal Perkins Loan is a federally funded campus based loan that is administered by the college aid office. Students do not apply separately for the Federal Perkins Loan. A Federal Perkins Loan is awarded to eligible students as part of an aid package at the college. A student will sign a promissory note outlining terms of repayment before receiving the funds. Check with your counselor or college financial aid officer for up-to-date information on interest rates and loan amounts, which are subject to change pending the finalization of legislation before Congress.
The Federal Family Education Loan Program encompasses two separate loan programs: a student loan known as the Federal Stafford Loan and a parent loan known as a Federal PLUS Loan. A FAFSA must be filed for Federal Stafford Loan consideration. Check with your counselor or college financial aid officer for updated information on interest rates and loan amounts, which are subject to change pending the finalization of legislation before Congress.
Federal Stafford Loan
A Federal Stafford Loan is a long-term, low-interest rate loan administered by the Department of Education through private commercial lending agencies such as banks and credit unions. Students can borrow Federal Stafford Loan funds regardless of financial need. If financial need is demonstrated, the federal government may subsidize part or all of the interest while the student is in school and during grace and deferment periods. If the student does not demonstrate financial need, part or all of the loan will be unsubsidized, and the student, rather than the federal government, is responsible for the interest while attending school and during grace and deferment periods.
The interest rate on subsidized Stafford loans will be reduced to 6% on July 1, 2008, and decrease annually until it reaches 3.4% on July 1, 2011. An additional cost of borrowing is an origination fee, which will be standardized and phased down annually until it is eliminated in 2010. Check with your counselor or college financial aid officer for updated information on interest rates and loan amounts, which are subject to change pending the finalization of legislation before Congress.
Federal PLUS Loan
A Federal PLUS Loan is a long-term, variable interest rate federal loan that is capped currently at 8.5%. A Federal PLUS Loan is available to the parents of dependent students. Like Federal Stafford Loans, Federal PLUS loans are administered by the Department of Education through private commercial lending agencies. There is no set limit on the amount of Federal PLUS funds that a parent may borrow, but the maximum loan cannot exceed the student's portion of the cost of education minus any other aid the student receives.
Federal PLUS loans are not subsidized, and eligibility is not based on financial need. Repayment usually begins immediately after the entire loan is disbursed. Federal PLUS Loans, like Federal Stafford Loans, have a phased down origination fee that will reduce by .5% annually until it is eliminated in 2010. Check with your counselor or college financial aid officer for updated information on interest rates and loan amounts, which are subject to change pending the finalization of legislation before Congress.
William D. Ford Federal Direct Loan Program
The William D. Ford Federal Direct Loan Program is a program almost identical to the Federal Family Education Loan Program, except that the federal government is the lender and the funds are delivered directly to the school. If the college the student plans to attend participates in the Federal Direct Loan Programs, the student will apply for a Federal Direct Stafford Loan and/or a Federal Direct PLUS Loan rather than a Federal Stafford or Federal PLUS Loan.
Federal Direct Stafford Loan applicants must file a FAFSA and, if eligible, must complete a promissory note provided by the college. Federal Direct PLUS Loan applicants must complete an application available at the college. Check with your counselor or college financial aid officer for updated information on interest rates and loan amounts, which are subject to change pending the finalization of legislation before Congress.
Student Loans In The News
Student loan debt now surpasses credit card debt in the US - LSU The Reveille
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Investment Group Wants Students To Rethink College Loans - NPR
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Find your way out of a student loan default - Economic Times
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