The 4 Federal Government Student Loan Types

Federal government student loans can be availed either through the Federal Family Education Loan (FFEL) Program or the William D. Ford Federal Direct Loan Program, also known as the Direct Loan. These two programs offer different types of student aids, listed are 4 types of student loan programs offered by the Department of Education to eligible students:

1. Federal Perkins Loans

Perkins loan is a campus-based federal government student loan that is made available for undergraduate and graduate students who demonstrate a financial need. The source of fund is provided by the school where the student is enrolled through the school's financial aid department. Undergraduate students can borrow up to $5,500 each year, while graduates students are allowed to borrow up to $8,000 per year. Perkins loans have rates of 5%. The borrower is given a nine month grace period to repay the loan after they finish their degree, drop the program, or leave the school.

2. Federal Stafford Loans

Stafford loans can be availed by students from either the FFEL and Direct Loan. The loan can be subsidized or unsubsidized. Subsidized financing aids are more beneficial to students because the government takes full responsibility with the interest while the student is still in school. The loans do not accrue interest, while the student is in school.  Unsubsidized loans are completely the opposite. The amount of money a student can borrow is based on their financial need. Borrowers who apply for the loan through FFEL should choose a private lending company. For loans obtained through Direct Loan, the federal government serves as the lender.

3. PLUS Loans

This federal government student loans are granted to eligible parents of undergraduates and to professional degree or graduate students. It is available in both FFEL and Direct Loan programs. The borrower should establish a good credit history in able to qualify for the student funds. Every year, he or she can borrow up to the total cost of attendance minus the amount he or she obtained from other sources of student financing aid. If for example the sum total of educational expenses is $8,000 and he or she was granted $4,000 from other funding, the PLUS loan program can provide him or her $4,000 to cover the gap of the education costs. PLUS loans availed through FFEL have a fixed interest rate of 8.5% and 7.9% for loans acquired through the Direct Loan program.

4. Direct Consolidation Loans

Direct consolidation loans combine several federal government student loans into one to simplify the repayments. With this type of program, all student aids obtained by the borrower is repaid and a new consolidated loan is made. For a borrower to qualify, the status of his or her FFEL or Direct Loans should be in default, deferment, repayment, or in grace. Students that are still attending school are ineligible for this plan. This loan program has lower overall rates and monthly payment compared to paying multiple loans. Furthermore, the repayment term is more flexible than other student financing aids.


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