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Federal Student Loans to the Student

The first type of federal student loans is a loan made directly to the student. These loans are available to college and university students and are used to supplement any personal and family resources, scholarships, grants, and work-study. These can be either subsidized by the U.S. Government or may be unsubsidized. It depends on the student's financial needs.

Both subsidized and unsubsidized federal student loans are guaranteed by the U.S. Department of Education, either directly or through guarantee agencies. Nearly all students are eligible to receive them (regardless of credit score or other financial issues). This is an area you should definitely explore.

These loans offer a grace period of six months, meaning no payments are due until six months after graduation or after the borrower becomes a less-than-half-time student without graduating.

These loans do have a fairly modest annual limit. The limit effective for loans disbursed on or after July 1, 2007 is

$3,500 per year for freshman undergraduate students
$4,500 for sophomore undergraduates
$5,500 per year for junior and senior undergraduate students, as well as students enrolled in teacher certification or preparatory coursework for graduate programs

Subsidized federal loans are offered to students with a demonstrated financial need. Financial need may vary from school to school, so you need to get this information from your school. For these loans, the federal government makes interest payments while the student is in college. If you borrow $10,000, when you are out of school you owe $10,000. Of course, at that time interest will become your responsibility as it incurs.

Unsubsidized federal student loans are also guaranteed by the U.S. Government, but the government does not pay interest for the student, so the interest accrues during college.

If you borrow $10,000 during college, you will owe $10,000 plus interest upon graduation. You can choose to pay the interest while still in college. Few students choose to exercise this option but it is not a bad idea if you can swing it.

Federal student loans for graduate students have higher limits: $8,500 for subsidized Stafford and $12,500 (limits may differ depending on your course of study) for unsubsidized Stafford.

Many students also take advantage of the Federal Perkins Loan. For graduate students the limit for Perkins is $6,000 per year.

Although there is no deadline for applying for these federal student loans, you should apply as soon as possible after January 1st of the year you plan to attend college. Some loans are awarded on a first come, first served basis.

Federal Student Loans - Why Get One?

Federal Student Loans PDF