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Federal Loans

Apply for college aid through the government.

If you determine that you might need to borrow to help to pay for school, there are two federal loan programs available to assist you in financing your education: the Perkins Loan Program and the Federal Family Education Loan Program (FFELP).

Perkins Loan Program

The Federal Perkins loan is a low-interest loan that a student borrows directly from his or her school. The Perkins interest rate is fixed at 5% annually, and the interest is subsidized (paid by the federal government until the student begins repayment). Since there is a limited amount of federal funding available at each school for this program, only students with high financial need are offered this loan. The maximum a qualifying undergraduate student can borrow each year through a Perkins loan is $4,000.

Federal Family Education Loan Program (FFELP)

If you do not qualify for Perkins, or you need additional loan funds, you should consider borrowing from the federal government. The Federal Family Education Loan Program — the FFELP for short — is the largest student financial aid program in the nation. It provides subsidized Federal Stafford loans, unsubsidized Federal Stafford loans, Federal PLUS loans, and Federal Consolidation loans.

Here's how it works. Private lenders (banks, credit unions, and savings and loan associations) lend money to families. By working with the federal government, the lenders offer the loans at a low interest rate. The cost to the borrower is kept low and the government may even pay the interest on some of the loans while the student is in school.

When you fill out the Free Application for Federal Student Aid (FAFSA), you'll find out if you qualify for a subsidized Stafford loan (one in which the government pays the interest until you begin repayment). You might also qualify for an unsubsidized Stafford loan (one in which you pay all the interest).

If you're a dependent undergraduate student, and you qualify for a base Stafford loan (may be subsidized or unsubsidized), you may borrow up to the following amounts:

• $3,500 if you're a first-year student enrolled in a program of study that is at least a full academic year.
• $4,500 if you've completed your first year of study, and the remainder of your program is at least a full academic year.
• $5,500 a year if you've completed two years of study, and the remainder of your program is at least a full academic year.

Independent undergraduate students and graduate and professional students can borrow additional amounts of Stafford loans.

The FFELP also offers PLUS loans to parents and graduate and professional students with good credit histories. Parents are able to borrow to pay the education expenses of their dependent undergraduate children. Graduate and professional students are able to borrow up to the cost of their education minus any financial assistance received. Generally, graduate and professional students will utilize PLUS loan funds for educational costs not covered by their Stafford loans. In addition, FFELP borrowers can also consolidate their loans so that they make only one payment a month. Talk to your financial aid office for more details about PLUS loans and Consolidation loans.

Dependent students whose parents don't qualify for federal PLUS loans can borrow additional amounts of unsubsidized Stafford loans.

Current interest rates on Federal Stafford and PLUS loans

All Federal Stafford loans disbursed on or after July 1, 2006, carry a fixed rate of 6.8%. Federal Stafford loans disbursed prior to 7/1/2006, will continue to have a variable interest rate (based on the 91-day Treasury bill). The interest rate on variable rate loans is controlled by federal law and is adjusted every year on July 1st. More information regarding variable interest rate Stafford loans is available on TG's Web site.

Lenders sometimes offer interest rate reductions during loan repayment. When choosing a lender for your student loan, shop around for the best repayment incentives.

The PLUS loan interest rate is fixed at 8.5% for loans disbursed on or after July 1, 2006. PLUS loans disbursed prior to July 1, 2006 will continue to have a variable interest rate based on the 91-day Treasury bill and adjusted annually every July 1.

Still need more information?

For more information about the kinds of financial aid available to you, including FFELP loans for you and your parents, ask the experts at (800) 845-6267. You can also find more information about federal student aid on the Department of Education's Web site (www.ed.gov).