Of all the loan types, federal loans are the most desirable to have in your financial aid package. They offer fixed, low interest rates, and in some cases, are subsidized. Federal student loans include Perkins, Stafford, Parent PLUS, and Graduate PLUS Loans. All except the Parent PLUS require you to fill out the FAFSA (Free Application for Federal Student Aid).
Federal Loan Facts
Stafford Loans have low, fixed interest rates but lower borrowing limits, so students often need to find funding from other sources to meet their needs. They come in two forms:
- Subsidized. No interest accrues on subsidized Stafford Loans while the student is enrolled, but the student must qualify by demonstrating financial need through the FAFSA.
- Unsubsidized. Interest does accrue on unsubsidized Stafford Loans while the student is enrolled, but nearly every student is able to borrow through the Stafford program regardless of need.
Perkins Loans are obtained directly through the school, and have very limited availability. They have low, fixed interest rates (5%) and are distributed to students with exceptional financial need.
Parent PLUS Loans
Parent PLUS Loans are federal student loans for parents of undergraduate students. PLUS Loans have a fixed interest rate (7.9%) and higher borrowing limits than other federal loans. Parents can borrow up to the cost of attendance minus any financial aid received by the student. PLUS Loan applications are available from the school’s financial aid office. In most cases parents must pass a credit check or have a creditworthy relative or friend who agrees to endorse the loan and repay the loan if your parents fails to do so.
Graduate PLUS Loans are federal student loans for graduate or professional program students that have a fixed interest rate (7.9%) and higher borrowing limits than other federal loans. You can borrow up to the cost of attendance minus any financial aid. Make sure to borrow the maximum in Stafford Loans before using a GradPLUS Loan.