Federal Student Loans

Many students apply for loans to pay for their college education. By far, federal student loans account for the majority of college education loans. Federal programs offer two basic loans for college students- the Federal Stafford Loan and the Federal Perkins Loan.

These loans have specific benefits over private loans including lower interest rates, longer repayment terms, a more flexible credit requirement, and the capability of postponing payments. Keeping these beneficial aspects in mind, students should always maximize available federal loans prior to acquiring any private loans.

Federal Stafford Loan

Federal Stafford Loans, the most common student loans, are made to undergraduate and graduate students who qualify. The federal government provides the funds for these low-cost loans, which must be repaid.

Not all schools participate in all of the federal programs. Therefore, it is important to check which program your school participates in. In the Federal Direct Loan Program, the federal government provides the funds directly. In the Federal Family Education Loan Program, a private lender provides the funds.



No payments are required while the student is enrolled in school on at least a half-time basis. A grace period exists after graduation prior to the commencement of payments. No prepayment penalty exists on the Federal Stafford Loan.

Qualifications

• The student must be a United States citizen or permanent resident of the United States.
• The student must attend an accredited school on at least a half-time basis.
• The student must complete a Free Application For Federal Student Aid, FAFSA.

Loan Limitations
Specific limits are in place on federal loans including annual and lifetime loan amount limits. Variations occur due to the student's status, that is dependent student versus independent student.

Annual Loan Limits For Dependent Students

• Freshman- $2,625
• Sophomore- $3,500
• Junior or Senior- $5,500

Annual Loan Limits For Independent Students

• Freshman- $6,625
• Sophomore- $7,500
• Junior or Senior- $10,500
• Graduate Students- $18,500

Lifetime Loan Limits For Students

• Undergraduate dependent students- $23,000
• Undergraduate independent students- $46,000
• Graduate students-$138,500

Repayment Terms

• Principal and interest are both gradually repaid over a ten-year term with a standard repayment plan.
• The initial payments are reduced and the subsequent payments are increased when using a graduated repayment system. This repayment plan is calculated over a ten-year term.
• Individuals with high levels of student loan debt may qualify for an extended repayment plan. This involves repayment over a twenty-five year term.
• An income-sensitive repayment plan allows individuals to repay their loans according to a percentage of their gross income. This type of plan requires an annual application.
• All eligible loans are lumped together and a single monthly payment is calculated with a fixed interest rate.

The standard repayment plan will have the lowest overall cost. Each of the other plans will incur higher costs.

Federal Perkins Loan

Federal Perkins Loans are loans made to undergraduate and graduate students who meet the qualifications, including the financial need requirement. The U.S. Department of Education sponsors these loans.

The school determines which students demonstrate the greatest need and awards loans accordingly. Some schools may even add funds from their sources to the amount of money provided by the government for this particular type of loan.

No payments are required while the student is enrolled at least half-time at the college. No fees are required for this specific loan. Additionally, the grace period for repayment is longer than that of a Stafford Loan.

Qualifications

• The student must be a United States citizen, permanent resident of the United States, or an eligible non-citizen status.
• The student must attend an accredited school on at least a half-time basis.
• The student must have satisfied all Selective Service requirements.
• The student must not have any defaults on Title IV educational loans.
• The student must complete a Free Application For Federal Student Aid, FAFSA.

Loan Limitations
A specific limit is placed on the loan amount per year per student. This limit remains the same and does not fluctuate when the student advances to the next academic year.

Annual Loan Limits For Students
Undergraduates- $4,000
Graduates- $6,000

Repayment Terms
Repayment begins nine months after graduation. Additionally, should a student leave the college without graduating or drop below half-year status, repayment begins immediately. Under certain circumstances, a deferment of payment may be requested and granted.