What you need to know about Student Loans?

Federal Family Education Loan Programs

Federal Family Education Loan (FFEL) Programs includes Federal Stafford Loans (subsidized and unsubsidized), Federal Plus (Parent) Loans, and Federal Consolidation Loans.

Under the FFEL Program, private lenders such as banks, credit unions, and savings and loan associations usually make the loans. Once a FFEL Program loan is made, it will be managed and collected by the lender or agency that holds the loan.

Federal Stafford Loans

Federal student loans are either subsidized or unsubsized. The government pays the interest on subsidized loans during the period you are in school. You are obligated to pay the interest on an unsubsized loan -- even the amount that accrues while you are in school.

The Federal Stafford subsidized loan is awarded on the basis of financial need, which was determined by the information you provided on the Free Application for Federal Student Aid (FAFSA). If you qualify for a subsidized loan, the federal government pays interest on the loan (subsidizes the loan) until you begin repayment and during authorized periods of deferment thereafter.

The Federal Stafford unsubsidized loan is not awarded on the basis of need. If you qualify for an unsubsidized loan, you will be charged interest from the time the loan is disbursed until it is paid in full. You can choose to pay the interest while you are in school or allow it to accumulate. If you allow the interest to accumulate it will be added to the principal amount of your loan and will increase the amount you have to repay. If you pay the interest as it accumulates, you'll repay less in the long run.

The interest rate for FFEL Program loans first disbursed on or after July 1, 1994, is variable but will never exceed 8.25 percent. The interest rate is adjusted each year on July 1. You will be notified of interest rate changes throughout the life of your loan.

You'll pay a fee of up to 4 percent, deducted proportionately from each disbursement of your loan. A portion of this fee goes to the federal government to help reduce the cost of the loans. The lender will send the loan proceeds to your school in at least two payments, either by electronic funds transfer or by check (made payable either to you or to both you and your school). Your school can pay you directly (usually by check), credit your account, or combine these methods.

After you graduate, leave school, or drop below half-time enrollment, you have a grace period of six months before you begin repayment. The amount of each payment depends on your loan amount and on the length of your repayment period. You have the option of repaying your loan using a fixed, graduated or income-sensitive repayment plan. The standard repayment plan is 10 years, but longer-term plans are also available.

Federal Plus Loan

Parent Loan for Undergraduate Students (PLUS Loans) enable parents with good credit histories to borrow to pay the education expenses of each child who is a dependent undergraduate student enrolled at least half time. The yearly limit on the amount to be borrowed under a PLUS Loan is equal to the cost of attendance minus any other financial aid for which the student is eligible. The interest rate is variable but will never exceed 9 percent. The interest rate is adjusted each year on July 1. Parents begin repaying the loan within 60 days after the final loan disbursement. There is no grace period for these loans. Interest begins to accumulate at the time the first disbursement is made.

Federal Consolidation Loan

A FFEL Consolidation Loan is designed to help student and parent borrowers consolidate several federal loans into one loan. With a FFEL Consolidation Loan, you'll make only one payment a month. The interest rate is fixed, based on the weighted average rate of the loans being consolidated. FFEL Consolidations Loans are available from participating lenders, such as banks, credit unions, and savings and loan associations. Most federal student loans or PLUS Loans can be consolidated.

For more information contact: http://mapping-your-future.org or call 1800-4-FED-AID

Direct Loan Information

Federal Direct Student Loan Program (FDSLP) includes (Direct) Stafford Loans (subsidized and unsubsidized), (Direct) PLUS (Parent) Loans, and (Direct) Consolidation Loans.

Under the Direct Loan Program, the U.S. Government makes loans directly to students and parents through their schools. (Under the FFELP, private banks make the loans.) Both programs, however, offer the same types of loans. Whether you receive a Direct Loan or a FFELP loan will depend upon which program or programs your school participates in. Once a Direct Loan is made, it will be managed and collected by the U.S. Department of Education's Direct Loan Servicing Center (1-800-848-0979). A FFELP loan is managed and collected by the lender or agency that holds the loan.

Direct Stafford Loans (Subsidized and Unsubsidized)

Federal student loans in both the FFELP and the Direct Loan Program are either subsidized or unsubsidized. The government pays the interest on subsidized loans during the period you are in school. You are obligated to pay the interest on an unsubsidized loan--even the amount that accrues while you are in school.

Direct Stafford (subsidized) Loans are awarded on the basis of financial need, which is determined by the information you provide on the Free Application for Federal Student Aid (FAFSA). If you qualify for a subsidized loan, the federal government pays interest on the loan (subsidizes the loan) until you begin repayment and during authorized periods of deferment.

Direct Unsubsidized Stafford Loans are not awarded on the basis of need. If you qualify for an unsubsidized loan, you will be charged interest from the time the loan is disbursed until it is paid in full. You can choose to pay the interest while you are in school, or allow it to accumulate. If you allow the interest the accumulate, it will be added to the principal amount of your loan and will increase the amount you have to repay. If you pay the interest as it accumulates, you'll repay less in the long run.

The interest rate for Direct Loans first disbursed on or after July 1, 1994, is variable but will never exceed 8.25 percent. The interest rate is adjusted each year on July 1. You'll be notified of interest rate changes throughout the life of your loan.

Under the Direct Loan Program, the U.S. Department of Education sends the loan proceeds to you through your school. Your loan will be disbursed in at least two installments. Your loan money must first be applied to your school account to pay for tuition and fees, room and board, and other school charges. If any loan money remains, the school will give you the funds by check or cash.

Repaying Your Direct Loans

After you graduate, leave school, or drop below half-time enrollment, you have a grace period of six months before you begin repayment. The amount of your payment depends on your loan amount and on the length of your repayment period. Under the Direct Student Loan Program, you have four repayment options:

1. Income Contingent Repayment Plan. Bases your monthly payment on your annual income and your loan amount.
2. Extended Repayment Plan. Allows you to extend loan repayment over a period of 12 - 30 years, depending upon your loan amount.
3. Graduated Repayment Plan. Permits lower payments at first that increase every two years over a period of time ranging from 12 - 30 years.
4. Standard Repayment Plan. Requires a fixed payment amount each month of at least $50 for up to 10 years.

Direct PLUS Loans

Both Direct and FFEL PLUS Loans enable parents with good credit histories to borrow to pay the education expenses of their children. The yearly limit on the amount to be borrowed under a PLUS Loan is equal to the cost of attendance minus any other financial aid for which the student is eligible. The interest rate on a PLUS Loan is variable but will never exceed 9 percent. The rate is adjusted each July 1. Parents begin repaying the loan within 60 days after the final loan disbursement. There is no grace period for these loans. Interest begins to accumulate at the time the first disbursement is made. Payment begins while the student is in school. To apply, you must fill out a Direct PLUS Loan Application and Promissory Note, available from a school financial aid office. You do not have to fill out a FAFSA unless your school requires it. Under the Direct PLUS Loan Program, your lender is the U.S. Department of Education. Loan money is sent directly to the school and applied to your school account. Repayment is made either through the Standard, Extended, or Graduated Direct Loan Repayment Plans.

Direct Consolidation Loans

Direct Consolidation Loans are designed to simplify loan repayment by allowing you to combine several federal student loans into one. There are three types of Direct Consolidation Loans: 1) Direct Subsidized Consolidation Loans; 2) Direct Unsubsidized Consolidation Loans; and 3) Direct PLUS Consolidation Loans. Direct Consolidation Loans may: 1) simplify the repayment process; 2) gain you additional deferment possibilities; and 3) allow you to take advantage of all of the Direct Loan repayments plans. (However, Direct PLUS Consolidation Loans are not eligible to be repaid under the Income Contingent Repayment Plan).
For more information, contact the Direct Loan Servicing Center's Consolidation Department,
1-800-557-7392. TDD number is 1-800-557-7395

Hours of Operation are Mon.-Fri. 8am to 8pm

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 guarantee 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 $3,000 per year for undergraduate students and $5,000 per year for graduate students, with cumulative limits of $15,000 for undergraduate loans and $30,000 for undergraduate and graduate loans combined. The Perkins Loan also offers better cancellation provisions than the Stafford or PLUS loans.

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