Federal Student Loans

The U.S. government has created a number of different federal student loan programs in order to address the needs of different groups of students. Depending on the type of help you need with paying for college, knowing the differences between government financial aid programs can make a big difference in finding a loan that really helps you. There are differences in the interest rates you can expect, as well as when you'll be expected to repay the loan.

In order to borrow money through most of the federal student loan programs, you will need to complete the Free Application for Federal Student Aid (FAFSA). Based on the information you provide through the application, as well as your tax return from the last year, the Federal Student Aid Office will decide which loans you are eligible for, and the amounts you can receive.

Stafford Loans

For many college students, a Stafford Loan is the best option: the program allows you to take out a student loan to help pay for school whether or not you can demonstrate financial need. You can actually get a Stafford Loan without credit approval, as well. The program offers both subsidized and unsubsidized loans, both of which are backed by the federal government. That government backing means that the loans are less risky for banks which, in turn, means that you can get a lower interest rate on your loan.

Perkins Loans

If you find that you have a high level of financial need, you may qualify for a Perkins Loan. It is harder to qualify for such a loan, but if you're eligible for a Perkins Loan, the terms are even better than most other student loans. Perkins Loans have much lower interest rates than other student loans and, as long as you're still enrolled in college, the government will pay the interest on your loan. You will also be able to avoid the origination fees which are standard for most student loans. There are lower limits on how much a student can borrow through the Perkins Loan program than through other financial aid options, however.

Parent PLUS Loans

In addition to programs for students to borrow money for college, the federal government allows parents to take out loans through the Parent PLUS program. While the terms of a Parent PLUS loan aren't as good as either Perkins or Stafford loans, it does provide a simple way for parents to cover any college costs that aren't covered by other financial aid programs. Technically, there is no limit to the amount of money you can borrow with a Parent PLUS loan — the amount of each loan is determined by subtracting the financial aid you have already received from the total cost of school for the year. Parent PLUS loans are subject to higher interest rates than other student loans and do require the borrower to have good credit. There are far fewer options for repayment, such as deferral, if you borrow through the Parent PLUS program.

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Guest's picture

I think it's important that, before you begin diving into student loans, you try to exhaust all other options first. For instance, make sure you've looked at scholarship and grant options at the various schools you are considering attending.

When you consider the various schools, also consider the cost of living differences between one town and another. Once you know that you definitely need student loans, try to borrow only what's necessary, and do your homework on the various types and repayment plans. Here's a website gives a rundown of different loan types.


Even though you don't have to make payments while in school, remember that every little bit helps to keep down those interest charges.