Student Financial Aid Direct Loans

The federal government provides billions of dollars every year to students through programs such as the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. Both of these programs consist of Stafford loans for students and PLUS loans for parents. Lenders offering these loan programs can be your school, a bank, credit union or any other participating private lender, and if you receive a Direct Loan the lender is the U.S. Dept. of Education.

Federal Perkins Loan

Perkins Loans are not direct loans but are provided by the government through participating schools to students who demonstrate the most need. The lender of your loan will be your school and you will get up to 10 years to repay your loan, depending on the amount owed. A couple benefits of a Perkins Loan are that you don’t have to be enrolled at least half-time and the loan amount is up to $4,000 a year with a maximum of $20,000 for undergraduates and $6,000 a year up to $40,000 for graduate students with a 5% interest rate.

Stafford Loans

Stafford Loans (FFEL) can be from a bank, credit union, or other participating private lender, or you can get a Stafford Loan from the U.S. Department of Education. This is known as a Direct Loan. Stafford loans are for undergraduate and graduate students and to be eligible you have to be enrolled at least half-time. The amount you can borrow varies on your grade level in school and your dependency status. The interest rate on these loans also varies based on current interest rates, which for July 1, 2007 to June 30, 2008 is 6.8%. As of July 1, 2008, the interest rate on subsidized Stafford Loans for undergraduate students will be reduced over a 4 year period from 6.0 down to 3.4%.

Plus Loans

Plus Loans (also known as Parents’s Loan for Undergraduate Students) are loans that parents can take out to help fund their childís education. To qualify, the student must be a dependent of the parent and an undergraduate attending school at least half-time. The parents must also not have a negative credit history to qualify for the loan. The maximum loan amount is calculated based on the studentís cost of attendance minus any other aid the student receives. The PLUS loan has a higher variable interest rate than the Stafford Loan, and is currently at 7.90% for Direct PLUS loans disbursed after July 1, 2006 and 8.50% for FFEL PLUS loans.

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