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Financial Aid for education is available as scholarships, grants, GI Bill benefits, student loans, tuition reimbursement, and work–study. Financial Aid sources include the federal government, state governments, and private organizations.

Federal Aid first. Always apply for and get as much federal and state financial aid as you can before applying for loans from private lenders.
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Federal Loan Programs

Federal loans are a form of federal financial aid. Federal loans are designed to help cover the costs of obtaining an education that grants, college scholarships, and family and student contributions can’t cover. Since they are loans, federal loans have to be paid back with interest. Because federal loans are legally binding contracts, you should think carefully about, and plan for, your ability to pay them back before you commit to one.

Stafford Loans


Stafford loans are for students pursuing undergraduate, graduate or professional degrees. You must be attending school at least half–time to be eligible for this type of federal loan. As of July 1, 2007, Stafford loan limits were increased and borrowing fees were decreased.


There are two types of Stafford Loans: subsidized and unsubsidized. The U.S.Department of Education pays (subsidizes) the interest accrued on subsidized Stafford Loans during certain periods. To receive a subsidized Stafford Loan, you must demonstrate a financial need. An unsubsidized Stafford loan, however, does not have this requirement.


Choosing a Stafford Loan provider (Lender)

When you get a Stafford Loan, your school will give you the option of choosing a lender from their preferred–lender list. (Only about 20 percent of schools have students borrow directly from the federal government through the Direct Stafford Loan Program; at all other schools, you will need to choose a lender.) The preferred lender list is only a starting place when shopping for financing.


Read the Lender’s Fine Print

Check the terms and fine print carefully. Not all students can take advantage of all the benefits lenders advertise. Choose the loan that offers the best upfront discounts, such as waiving both origination and default fees, or other immediate discounts. Benefits that are promised several years down the road usually won’t help you if you consolidate your loans or get into financial trouble.



William D. Ford Federal Direct Loan (Direct Loan) Program. The federal loans given through this program are called Direct Loans. With this program, parents and students borrow directly form the Department of Education. This program provides subsidized and unsubsidized loans. These federal loans are repaid directly to the Department of Education.
Federal Family Education Loan (FFEL) Program. These federal loans are referred to as FFEL loans. The funds for FFEL loans are provided by private lenders but are guaranteed by the U.S. Government. FFEL loans include subsidized and unsubsidized FFEL Stafford Loans, FFEL PLUS Loans and FFEL Consolidation Loans. You have to repay these loans back to the bank or private lender that issued them


Perkins Loans


The Perkins Loan is awarded to undergraduate and graduate students with exceptional financial need. This is a campus–based loan program, with the school acting as the lender using a limited pool of funds provided by the federal government. The Perkins Loan is the best student loan available. It is a subsidized loan, with the interest being paid by the federal government during the in–school and 9–month grace periods. There are no origination or default fees, and the interest rate is 5%. There is a 10–year repayment period.


The amount of Perkins Loan you receive is determined by your school’s financial aid office. The program limits are $5,500 per year for undergraduate students and $8,000 per year for graduate students, with cumulative limits of $27,500 for undergraduate loans and $60,000 for undergraduate and graduate loans combined.


PLUS Loans


PLUS Loans for Parents

Parents can borrow a PLUS Loan to help pay your education expenses if you are a dependent undergraduate student enrolled at least half time in an eligible program at an eligible school. PLUS Loans are available through the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. Your parents can get either loan, but not both, for you during the same enrollment period. They also must have an acceptable credit history.


PLUS Loans for Graduate and Professional Students

Fortunately, graduate and professional degree students are also eligible for federal PLUS Loans. You can get a PLUS loan through the Direct Loan and FFEL Loan programs, and borrow the cost of your attendance minus other estimated financial assistance. To be eligible for a PLUS loan, you must fill out a Free Application for Federal Student Aid (FAFSA) and apply for and receive the annual maximum loan under the federal subsidized and unsubsidized Stafford Loan program. You must also have an acceptable credit history.


  • Borrow up to the cost of your attendance minus any other financial aid you receive
  • Fixed interest rates of 7.9% for a Direct PLUS loan and 8.50% for a FFEL PLUS Loan
  • Loan fee of no more than 4%
  • You get your money through your school
  • No payments until 60 days after all the money has been paid out to you (parents'PLUS loan) or on the date of the last payout (grad or professional student PLUS loan)
    Consolidation Loans

    A Consolidation Loan is a federal loan that allows the borrower to combine multiple education loans into a single loan with one monthly payment.





    Source: “Funding Education Beyond High School,” Student Aid on the Web, U.S. Department of Education,



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