There are three federal loan programs:

Federal Family Education Loan Program

Loans are financed by private lenders. Serviced and administered by the private sector.

Federal Direct Student Loan Program

Loans made available directly from government. Serviced and administered by federal contractors.

Perkins Loan Program

Perkins loans are granted by colleges to students with exceptional financial need. They offer very desirable terms.

• – Their fixed interest rate is 5%, which is lower than the rate of other federal loans.
• – A 9-month grace period before repayment exists after students graduate, withdraw from school, or cease to be enrolled at least half-time.
• – For students in certain professions, Perkins loans may offer generous forgiveness programs after graduation.

FFEL Types:

Stafford Subsidized

Stafford Subsidized loans are the form of federal financial aid most commonly offered to students by colleges. These loans are granted to students but usually disbursed (see Terms to Know at right) to schools, who apply the funds toward tuition, fees, and room and board expenses. The fact that these loans are subsidized (see Terms to Know at right) means that their terms are more desirable than some other loans:

• – They accrue interest while students attend school, but the U.S. government pays the interest until the repayment period begins
• – A 6-month grace period before repayment exists after students graduate, withdraw from school, or cease to be enrolled at least half-time.
• – These loans are awarded based on financial need.

Stafford Unsubsidized

Stafford Unsubsidized loans are not subsidized, so the federal government does not pay the interest they accrue while students are in college. As a result, borrowers may either pay the interest on these loans while they are in school or allow the interest to be added (capitalized) onto the principle balance at the end of the loan period.

• – A 6-month grace period before repayment exists after students graduate, withdraw from school, or cease to be enrolled at least half-time.

Parent PLUS

Parent PLUS loans may be borrowed by students’ parents or guardians.

• – These loans remain the responsibility of the parents until they are paid in full and cannot be transferred to students after their college studies are completed.
• – PLUS loans may be applied toward any remaining tuition, fees, or room and board costs not covered by other types of financial aid.
• – Parents must successfully pass a credit check and meet other eligibility requirements before borrowing.
• – Unlike other federal loans, which start repayment once college classes have finished, PLUS loan repayment begins almost immediately after the funds are received by the school.

Grad PLUS

Grad PLUS loans are granted to students continuing their education above the bachelor’s degree level.

• – Grad PLUS loan repayment begins almost immediately after the funds are received by the school. However, qualified students are eligible for a deferment of their loan payments while enrolled in school.
• – Applicants must successfully pass a credit check and meet other eligibility requirements.

Consolidation

Consolidation is a popular repayment option that allows borrowers to combine multiple loans into 1, extend the repayment term, and, in some cases, lower the monthly payment.

Total FFELP Volume Nationwide for Fiscal Year 2006 (approximate):

• – Stafford Subsidized—$11 billion
• – Stafford Unsubsidized—$12 billion
• – PLUS—$3 billion
• – Consolidation—$48 billion