Stafford Loans are federal loans for both undergraduate and
graduate students. It is not necessary to show financial need to
be eligible for a Stafford Loan.
Students attending "Direct
Lending Schools" have their loans administered by the school
and the loans are provided directly to students and parents.
Federal Direct Student Loan Program (FDSLP) loans.
Students not attending "Direct Lending Schools" receive their
loans from private institutions like banks, savings & loans
and credit unions. These are
Federal Family Education Loan Program (FFELP) loans and are
guaranteed against default by the federal government.
Stafford Loans can be subsidized only when the student
demonstrates financial need. The interest is paid by the
federal government while the student is in school or during
authorized periods of deferment with a subsidized loan.
will be charged interest from the time
the loan is disbursed until it’s paid in full. The interest
will accrue (accumulate) while the student is in school or
during other periods of nonpayment. It can be
is, the interest will be added to the principal amount of the
loan, and additional interest will be based on that higher
amount. This increases the amount to be repaid after
- Generally, the total
debt you can have outstanding from all Stafford Loans combined
- $23,000 as a dependent undergraduate
- $46,000 as an independent undergraduate
student (only $23,000 of this amount may be in subsidized
- $138,500 as a graduate or professional
student (only $65,500 of this amount may be in subsidized
loans). The graduate debt limit includes any Stafford Loans
received for undergraduate study.
- The interest rate on a Stafford Loan is
variable, but it cannot exceed 8.5%.
- A fee of up to 4 percent of the loan,
deducted proportionately from each loan disbursement is
assessed. For a FFELP Stafford Loan, a portion of this fee
goes to the federal government, and a portion goes to the
guaranty agency to help reduce the
cost of the loans. For a Direct Stafford Loan, the entire fee
goes to the government to help reduce the cost of the loans.
Also, if the student doesn’t make their loan payments when
scheduled, they may be charged collection costs and late fees.
- Stafford Loans can be partially cancelled
if the student becomes a full-time teacher for five
consecutive years in a designated elementary or secondary
school serving students from low-income families.
Perkins Loans are awarded to both undergraduate and graduate
students on the basis of exceptional financial need. The school
acts as the lender. The funds come from a limited allotment of
funds provided by the federal government.
Perkins Loans are
subsidized. The federal government pays the interest while the
student is in school and for a 9 month grace period.
There are no origination or
The interest rate is 5%.
There is a 10 year repayment
The school's financial aid
office determines the actual amount any one student's loans.
The limit per year for undergraduates is $4,000 and $6,000 for
graduate students. Students are limited to a cumulative total
of $20,000 as undergraduates and $40,000 for undergraduate and
graduate loans combined. Some schools are allowed to exceed
these limits by up to $1,000 per year and offer
correspondingly higher cumulative amounts due to their overall
low default rates of under 15%.
There are a variety of ways
that Perkins Loans can be cancelled by meeting the criteria of
the forgiveness programs. These include certain types of
volunteer work, military service, teaching or practicing
medicine in certain communities and others. Information on
Perkins loan cancellation can be found on the Student Guide
section of the Department Of Education website by
Plus Loans are loans that parents take out to help pay for their
child's undergraduate higher education.
Plus loans are not
subsidized. Interest rates are variable but will not exceed
true for Stafford Loans, there are FFEL PLUS Loans and Direct
Loans require passing a credit check.
yearly limit on a PLUS Loan is equal to the
cost of attendance
minus any other financial aid received.
parents will pay a fee of up to 4 percent of the loan,
deducted proportionately each time a loan disbursement is
made. For a FFEL PLUS Loan, a portion of this fee goes to the
federal government, and a portion goes to the
to help reduce the cost of the loans. For a Direct PLUS Loan,
the entire fee goes to the government to help reduce the cost
of the loans.
Loans can be partially cancelled if the student becomes a
full-time teacher for five consecutive years in a designated
elementary or secondary school serving students from
PLUS Loan for parents of undergraduate students-- as low as
Private loans are loans with no government involvement. They are
loans provided by private lenders such as banks, savings & loans
and credit unions. They do not require evidence of financial
need. Parents and students must meet the eligibility
requirements of the lender to secure these loans. The terms and
repayment of private loans may be more flexible that federal
loans but they tend to cost more. Many parents consider
equity loans as a private loan vehicle. One lender providing
personal loans with online applications is
A Consolidation Loan allows you to combine one or more of your
federal education loans into a new loan that offers you several
advantages such as one monthly payment, flexible repayment
options, and reduced monthly payments.
significantly increase the total cost of repaying student loans.
There generally is a longer period of time to repay a
consolidation loan, but there will be more payments and thus
more interest. Two lenders who provide consolidation loans with
online applications are
Scholar Point and