Federal Loans

Federal Loans

Apply for college aid through the government.

If you determine that you might need to use loans to help to pay for school, there are two federal loan programs available to assist you in financing your education; including the Perkins Loan Program and the Federal Family Education Loan Program (FFELP).

Perkins Loan Program

The Federal Perkins Loan Program offers a low-interest loan that you borrow directly from your school. The Perkins interest rate is fixed at 5% annually, and the interest is subsidized (paid by the federal government until you begin repayment). Since there is a limited amount of federal funding available at each school for this program, only students with high financial need are offered this loan. The maximum a qualifying undergraduate student can borrow each year through a Perkins loan is $4,000.

Federal Family Education Loan Program (FFELP)

The Federal Family Education Loan Program — the FFELP for short — is the largest student financial aid program in the nation. Private lenders (banks, credit unions, and savings and loan associations) lend federal loan funds to families through several types of loans:

Subsidized Federal Stafford Loans are loans in which the federal government pays the interest that accrues during in-school, grace, authorized deferment, and (if applicable) post-deferment grace periods.
Unsubsidized Federal Stafford Loans are loans which are not based on need. You are responsible for paying the interest during in-school, grace, and deferment periods, in addition to repayment periods.
Federal PLUS Loans are loans available to eligible parents of a dependent undergraduate student attending a participating postsecondary school and to an eligible graduate or professional students enrolled in an eligible graduate or professional program at a participating school. As a PLUS loan borrower, your parents or you must not have adverse credit or must obtain a creditworthy endorser to be eligible for the loan. Your parents or you are responsible for paying to the lender the interest that accrues on the loan from the time the loan is disbursed until it is paid in full.
Federal Consolidation Loans are loans available to you if you want to combine your outstanding education loans into a single loan with a single monthly payment. In most cases, you are responsible for paying to the lender the interest that accrues on the loan until the loan is paid in full.

When you fill out the Free Application for Federal Student Aid (FAFSA), you'll find out if you qualify for a subsidized Stafford loan (one in which the government pays the interest until you begin repayment). You might also qualify for an unsubsidized Stafford loan (one in which you pay all the interest).

If you're a dependent undergraduate student (except students whose parents cannot borrow PLUS), and you qualify for a base Stafford loan (may be subsidized or unsubsidized), you may borrow up to the following amounts:

$5,500 - no more than $3,500 of this amount may be subsidized - if you're a first-year student enrolled in a program of study that is at least a full academic year.
$6,500 - no more than $4,500 of this amount may be subsidized - if you've completed your first year of study, and the remainder of your program is at least a full academic year.
$7,500 - no more than $5,500 of this amount may be subsidized - if you've completed two years of study, and the remainder of your program is at least a full academic year.

Independent undergraduate students and dependent students whose parents cannot borrow PLUS and graduate and professional students may borrow up to the following amounts:

$9,500 - no more than $3,500 of this amount may be subsidized – if you're a first-year student enrolled in a program of study that is at least a full academic year.
$10,500 - no more than $4,500 of this amount may be subsidized – if you've completed your first year of study, and the remainder of your program is at least a full academic year.
$12,500 - no more than $5,500 of this amount may be subsidized – if you've completed two years of study, and the remainder of your program is at least a full academic year.

Graduate and professional students may borrow up to $20,500 – no more than $8,500 may be subsidized.

The FFELP also offers PLUS loans to parents and graduate and professional students with good credit histories. Parents are able to borrow to pay the education expenses of their dependent undergraduate children. Graduate and professional students are able to borrow up to the cost of their education minus any financial assistance received. Generally, graduate and professional students will utilize PLUS loan funds for educational costs not covered by their Stafford loans. In addition, FFELP borrowers can also consolidate their loans so that they make only one payment a month. Talk to your financial aid office for more details about PLUS loans and Consolidation loans.

Current interest rates on Federal Stafford and PLUS loans

For a subsidized Stafford loan made to an undergraduate student for which the first disbursement is made on or after:

July 1, 2006 and before July 1, 2008	6.8%
July 1, 2008 and before July 1, 2009	6.0%
July 1, 2009 and before July 1, 2010	5.6%
July 1, 2010 and before July 1, 2011	4.5%
July 1, 2011 and before July 1, 2012	3.4%

* The interest rate for each loan period remains fixed for the life of the loan.
For an unsubsidized Stafford loan made to an undergraduate student or any Stafford loan made to a graduate student for which the first disbursement is made on or after July 1, 2006 the fixed interest rate is 6.8%. The PLUS loan interest rate is fixed at 8.5% for loans disbursed on or after July 1, 2006.

Federal Stafford and PLUS loans disbursed prior to July 1, 2006 will continue to have a variable interest rate. The interest rate on variable rate loans is controlled by federal law and is adjusted every year on July 1st. More information regarding variable interest rate Stafford and PLUS loans is available at http://www.tgslc.org/borrowers/loans/index.cfm.

Lenders sometimes offer interest rate reductions during loan repayment. When choosing a lender for your student loan, shop around for the best repayment incentives.

Still need more information?

For more information about the kinds of financial aid available to you, including FFELP loans for you and your parents, ask the experts at (800) 845-6267. You can also find more information about federal student aid on the Department of Education's Web site (www.ed.gov).