Government Student Loans-What Students Should Know

Many students find it difficult to meet the financial obligations of a college education. Government student loans, with low interest rates and no requirements regarding credit checks and collateral, are an attractive option. When comparing the different types of government student loans it is important to consider several key points.

Stafford Government Student Loans

There are two main types of Stafford government student loans: subsidized and unsubsidized. With the subsidized student loan, the government will front the interest while you are in school. To qualify for a subsidized student loan; however, you will need to demonstrate financial need.

With the unsubsidized Stafford loan, you are responsible for the accrual of interest while you are in school. You may elect to begin paying on the interest before you graduate; although that is not required. If you do not make payments; however, the interest will continue to accrue. This will increase the total size and cost of the loan. All students, regardless of ability to demonstrate financial need, are eligible for the unsubsidized Stafford loan.

In addition, Stafford loans may be administered directly by the government or by private lenders. Loans which are disbursed by the government come through the Federal Direct Student Loan Program, or FDSLP. Those which are administered by private lenders are issued through the Federal Family Education Loan Program or FFELP.

Stafford loans disbursed after July 1, 2006 feature a fixed, low interest rate. While these loans may include up to a 3% fee, it is possible to find some lenders which will pay at least a portion of the fee. Annual loan limits depend on whether the student is dependent or independent as well as the year in which the student is enrolled in school. Independent upperclassmen qualify for higher annual loan amounts. Repayment begins six months after the student graduates, withdraws or falls to less than half-time enrollment.

Perkins Government Student Loans

Other government student loans include the Perkins loan, which is awarded to both graduate and undergraduate students. It is important to keep in mind that you must demonstrate financial need for this loan. In addition, it is a campus-based loan; which means the school acts as the lender of the loan utilizing funds which have been provided by the government.

This is a subsidized loan, with the interest paid by the federal government during your time in school as well as during the 9 month grace period after you leave school or graduate.

The Perkins loan features a fixed, low interest rate. No origination fees apply to this loan and the interest rate is low. Annual loan amounts are limited to $4,000. Repayment begins 9 months after the student graduates, withdraws or falls to less than half-time enrollment. The Perkins loan comes with a 10 year repayment period.

When comparing these two government student loans, it is important to keep in mind the following key points:

• Interest Rates
• Fees
• Annual Loan Limits
• Repayment Requirements