Federal student loans in the United States are authorized under Title IV of the Higher Education Act as amended. When it comes to federal student loans, there are a number of programs available. The following information provides background on federal loans Always consider federal student loans first!

These loans supply financial aid for students enrolled at a school that participates in federal aid programs. When referring to a school, this means a two-year or four-year public or private college, university, or trade school. These loans are offered by private organizations under accordance from the U.S. Department of Education through the Federal Family Education Loan Program (FFELP) and the Federal Direct Student Loan Program (FDLP).

Federal student loans generally cover school expenses, including tuition and fees, room and board, books and school supplies, as well as any transportation. Loans can also help pay for technology needs (i.e., a computer) and for necessary dependent care.

There is a variety of federal student loan programs. Check with your school to see which programs they participate in.

Stafford Loans are federal student loans made directly available to college and university students and are used to supplement personal and family resources, scholarships, grants, and work-study. They may be subsidized by the U.S. Government or may be unsubsidized depending on the student’s financial need.

Both subsidized and unsubsidized loans are guaranteed by the U.S. Department of Education either directly or through guarantee agencies. Nearly all students are eligible to receive them (regardless of credit score or other financial issues). Both types offer a grace period of six months, which means that no payments are due until six months after graduation or three months after the borrower becomes a less-than-full-time student without graduating. Both types have a modest annual limit. The limit for the academic year beginning in 2007 is $3,500 per year for freshman undergraduate students, $4,500 for sophomore undergrads, and $5,500 per year for junior and senior undergrads.

Subsidized federal student loans are offered to students with a demonstrated financial need: generally requiring a lower family income. For these loans, the federal government makes interest payments while the student is in college. For example, those who borrow $10,000 during college will owe $10,000 upon graduation.

Unsubsidized federal student loans are also guaranteed by the U.S. Government, but the government does not pay interest for the student, rather the interest accrues during college. Those who borrow $10,000 during college will owe $10,000 plus interest upon graduation. Students can choose to pay the interest while still in college.

Federal student loans for students of medicine have higher limits: $8,500 for subsidized Stafford and $30,000 maximum for unsubsidized Stafford. Many students also take advantage of the unsubsidized Perkins Loan. For graduate students the limit for Perkins is $6,000 per year.

There is nothing better than money you do not have to give back. Last year, there was over $31 billion in unmet financial need. Do not let yourself be one of the students who did not get all the financial aid you could.

PLUS Loans are offered to parents of students enrolled at least part time in a program included within a formal list of participating post-secondary institutions. PLUS Loans are also available for graduate and professional students. PLUS loans differ from Stafford and Perkins Loans (other federal student loans) in that it can cover a larger amount of the cost of education, has a higher interest rate and the commitment is undertaken by the parent, rather than the student.

This Graduate PLUS Loan is similar to the Parent PLUS Loan as it is an unsubsidized federally guaranteed loan up to the cost of education. It is taken out in the graduate student’s name on their own signature and credit rating. It has the same federal loan deferment and forbearance options as the Stafford Loan, so graduate and professional students can postpone repayment of their federal aid while enrolled at least half time in a degree or certificate program.

If a student has a series of loans, through the Stafford, PLUS or Perkins programs, they have the option to consolidate federal aid loans into one single debt. This results in reduced monthly repayments and a longer term for the loan, at a fixed interest rate. The term of the loan can be between 10-30 years. Although the monthly repayments are lower, the total amount paid over the term of the loan is higher than would be paid with other loans. The calculated fixed interest rate is based on the average rate of the loans being consolidated. These rates are weighted, based on the amounts borrowed. Private student loan consolidation is an option for students with private student loans to consolidate.

So, now you know all there is to all of your financial aid options. What is best for you?

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