Today, federal college student loans are one of the largest forms of college student aid. Making up 41 percent of the total financial college student aid awarded to undergraduate college students each year. Most college students can expect to receive a student loan as part of a financial aid award package. There are typically two kinds of categories for a college student loan; loans based on financial aid need and loans not based on financial aid need.

College Student Loans Based on Financial Aid Need

The federal government is the main provider of need based college student loan funds. Your award letter will always list the kind and the amount of need based loans.

Features of Need Based College Student Loans

Need based college student loans usually share three distinct features?

1. A Low Interest Rates – Stafford College Student Loans offer a fixed interest rate of 6 percent and PLUS College Student Loans are fixed at 8.5 percent. The Perkins College Student Loan interest rate is currently at 5 percent. No credit check will be required for a federal college student loan.
2. Delayed Repayment – With a need based federal college student loan, no payments on principal will be due until after you graduate or leave school.
3. In School Interest Subsidy – This simply means the government pays the interest that accrues on the student loan while you are in school and during the six-month grace period after graduating, resulting in some substantial savings. If you did not have this subsidy, you would either need to make interest payments while in school, or the interest would be added to the principal of the student loan, making it a much more expensive college student loan.

The Three Need Based College Student Loans

Typical need based college student loans are Perkins College Student Loans, subsidized Stafford College Student Loans, and Direct Student Loans. For loans based on financial aid need, the financial aid office at you school of choice will help guide you through the process.

• Perkins College Student Loans – If you have been awarded a Perkins College Student Loan, the Financial Aid Office will send a promissory note that must be signed and returned. Since the college has already been given its Perkins loan funds, it simply transfers the funds to your student account as a credit against charges.
• Subsidized Stafford College Student Loans – For a Subsidized Stafford College Student Loans, the financial aid office will generally ask you to choose a lender. Many lenders will offer online loan applications. Remember you do not have to use there preferred list. Once you have completed the student loan application and the loan is approved, the money will be sent directly to your school for disbursement. Usually, the loan amount will appear as a credit on your account.
• Subsidized Direct Student Loans – Direct Student Loans work the same way as a Stafford College Student Loan except that the federal government is the lender.

Non-Need Based College Student Loans

These are outside of normal need college student loans, often times used to help families that cannot afford to pay their expected contribution from savings and current income.

Some colleges will include one or more of these college student loans in your award letter. When reviewing your financial aid, you should removed these loans and put them to the side. When you have calculated your family’s share of cost, you may find that it is more than you can afford. If so, it is time to consider these types of loans.