Stafford Loans
Stafford Loans are available to students attending an eligible post-secondary school. There is no credit-worthiness requirement, but all these student loans must be certified by the school attended. There are two types – unsubsidized and subsidized. A student who demonstrates financial need is eligible to have the federal government pay the interest on the loan until repayment of the loan begins. A student may have a combination of a subsidized student loan and unsubsidized student loan.
Perkins Loan
The Perkins Loan is a federally insured student loan funded by the federal government, awarded by the school, featuring a low interest rate and is repayable over an extended period. It is awarded to undergraduate and graduate students with exceptional financial need. This is a campus-based student loan program, with the school acting as the lender using a limited pool of funds provided by the federal government.
The Perkins Loan is a subsidized student loan, with the interest being paid by the federal government during the in-school and 9-month grace periods. There are no origination or guarantee fees, and the interest rate is 5%. There is a 10-year repayment period. The amount of a Perkins Loan you receive is determined by your school's financial aid office. The program limits are $4,000 per year for undergraduate students and $6,000 per year for graduate students, with cumulative limits of $20,000 for undergraduate student loans and $40,000 for undergraduate and graduate financing combined.
PLUS Loans
PLUS student loans are available to an eligible parent of a dependent undergraduate student attending a participating post-secondary school. Parents can borrow amounts covering the total cost of education minus financial aid received. A PLUS Loan borrower must pass a basic credit check (credit score and income are not factored in) and is responsible for repaying principal and interest from the time the loan is funded.
Parents of dependent students can take out loans to supplement their children's aid packages. The PLUS loan lets parents borrow money to cover any costs not already covered by the student's financial aid package, up to the full cost of attendance. There is no cumulative limit. Like the Stafford Loan, PLUS loans are either FFELP (provided by private lenders) or Direct (funds provided by the government). This is not a subsidized student loan; the borrower is responsible for all of the interest accrued on this type of loan. Repayment begins 60 days after the funds are fully disbursed, and the repayment term is up to 10 years. There is no grace period as there is with the Stafford Loan program. Some lenders allow parents to defer payment on the PLUS Loan while the student is enrolled in school by capitalizing the interest.
Graduate and Professional Student PLUS Loans
This is a fairly new variation on the PLUS loan - graduate and professional students are now able to borrow money through the PLUS Loan program to pay for their own education. All of the information stated above regarding PLUS loans also apply to the GradPLUS loan. The Graduate and Professional PLUS loan will not reduce eligibility for the Stafford Loan, but the PLUS loan limit will take the amount borrowed under the Stafford Loan into account.
Consolidation Loans
This student loan is available to any borrower (both students and parents) who wants to combine his or her outstanding government guaranteed student loans into a single loan with a single monthly payment. Effective mid-2006, student loan interest rates for consolidation are fixed for the entire term. The base consolidation interest rate is determined by taking the weighted average of the current interest rates on the existing/underlying student loans that are consolidated, rounded up to the nearest 1/8th of one percent.
More Information
For more details on federal student loans, including current interest rates, link to the Department of Education’s Federal Student Aid website for students, parents and counselors - http://studentaid.ed.gov/PORTALSWebApp/students/english/index.jsp