Understanding Your Federal Loan Options

Federal financial aid is based on financial need and is available to students as a supplement to their personal resources. Loans are provided through the Department of Education and the Federal Direct Student Loan Program. Having previously completed the FAFSA (Free Application for Federal Financial Aid), you have paved the way for your federal loan applications, and will now be able to apply for additional state and institutional aid in the form of grants and scholarships.

Once your award letter is received, you may begin applying for loans. There are a few types of federal loans you may be eligible for.

Stafford Loans

Stafford loans have a low fixed interest rate, have flexible income-based repayment options, and are based on need rather than credit. These Federal loans are used primarily for tuition, books and on campus housing, whereas private student loans can also be put toward supplies, off campus housing, transportation and even laptops for schoolwork.

With a subsidized Stafford loan, interest does not accrue while you are attending school or during the post-graduation grace period, but there is a maximum amount a student can borrow. Interest does accrue on an unsubsidized Stafford loan, but the interest payments can also be deferred. To qualify for a subsidized Stafford loan, one must show a significant amount of financial need.

For more detailed information on Stafford Loans, visit the Student Loan Network's Stafford Loan page.

Parent PLUS Loans

The Federal PLUS Loan is borrowed by a parent on behalf of a child in order to contribute to tuition and school related expenses. The student must be enrolled at least half-time, and the parent must have moderately good credit. PLUS loans have some of the lowest interest rates available and allow parents to borrow up to the total cost of attendance.

PLUS loans, along with private student loans, can help fill the gap after Stafford loans and scholarships. The primary benefit is that families can borrow federally guaranteed, low interest loans to help pay for their child's education, without needing to worry about collateral, need-based forms, or FAFSA preparation time.

Federal Perkins Loan

The Perkins Loan is a low-interest federal student loan for undergraduate and graduate students. In the case of Perkins Loans, the college acts as the lender, drawing funds from a small pool of money provided by the federal government. Perkins Loans are awarded based on exceptional financial need.

Graduate Loans - Stafford Loans and Graduate PLUS Loans

The cost of attending graduate school has increased nearly 35% in the last 10 years. As a result, graduate student financial aid has become increasingly important. Though still based on financial need, Graduate Stafford loan limits are much higher than undergraduate Stafford loan limits.

Graduate students can also apply for PLUS Loans to help pay for the total cost of education minus any aid already awarded. Similar to the Parent PLUS Loan, the graduate student would need to have a good credit history with minor adversities.

Next Step: Find additional financial aid