Federal Student Loans

Student loans, unlike grants and work-study, are borrowed money that must be repaid, with interest, just like car loans and mortgages. You cannot have these loans canceled because you didn't like the education you received, didn't get a job in your field of study or because you're having financial difficulty. Loans are legal obligations, so before you take out a federal student loan, be sure and think about the amount you'll have to repay over the years.

Stafford Loans (FFELs and Direct Loans)
In addition to Perkins Loans, the United States Department of Education administers the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. Both the FFEL and Direct Loan programs consist of what are known as Stafford Loans (for students) and PLUS Loans (for parents).

Colleges usually participate in either the FFEL or Direct Loan program but sometimes participate in both. With the Direct Loan Program, the funds for your loan come directly from the federal government. Funds for your FFEL will come from a bank, credit union, or other lender that participates in the program. Eligibility rules and loan amounts are identical under both programs, but repayment plans will differ.

How do you get a FFEL or Direct Loan?
For either type of loan, you must fill out a FAFSA. After your fafsa is processed, your school will review the results and will inform you about your loan eligibility. You also will have to sign a promissory note, a binding legal document that lists the conditions under which you're borrowing and the terms under which you agree to repay your loan.

How to Choose and Evaluate Lenders
You'll need to choose a lender if you obtain a FFEL Stafford Loan. (If you have a Direct Stafford Loan, then federal government is your lender.) Schools that participate in the FFEL Program will usually have a list of preferred lenders. Student loan borrowers may choose a lender from that list, or choose a different lender they prefer, like a credit union.

Federal Perkins Loan
The Federal Perkins loan is made through participating schools to undergraduate, graduate and professional students.  The Perkins loan is offered by participating schools to students who demonstrate the greatest financial need and the Federal Pell Grant recipients get top priority.  The Perkins loan is made to students enrolled full-time or part-time in a college.  These loans must be repaid by you to your financial aid office.

Eligibility and Interest Rates
Students who are undergraduate and graduate students are eligible.  Students have to be enrolled at least half-time.  The amount you earn can't exceed your total Federal Work-Study award. When assigning work hours, your employer or financial aid administrator will consider your class schedule and your academic progress.

The Federal Perkins loan has a 5 percent interest rate.  The interest rate is purposely kept low to reduce the burden of paying for your college education.

Student Loan Consolidation
There is a chance that you will need to obtain several different student loans to finance your education. Paying on the different loans can get confusing and you migh want to consider consolidating your student loans into one loan. Through school loan consolidation you might be able to adjust your repayment terms and even lower the interest rate on your loan.

If you don't qualify for a Federal Student Loan, consider several of the other options for financing your college education. Consider a private student loan to further your education. Be smart when you make financial decisions and don't get in over your head. Spend the time to research your options for college financial aid.