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The Low Down on Student Loans

So you got accepted to the college of your choice but now you have to figure out how you are going to pay for it all. Lucky for you there are some options out there.

Student loans are loans that carry low interest rates and have special terms that cater specifically to student needs. There are two main types of student loans, Federal Stafford Loans and Federal Perkins Loans. These loans are guaranteed by the U.S. Government, so they offer lower interest rates than you could get from a personal loan, and they also have strict eligibility requirements and borrowing limits.

Federal Stafford Loan:

The Stafford Loan is available to all full-time or half-time students. To be eligible for this loan students must fill out the Free Application for Federal Student Aid (FAFSA). This loan is available directly from the United States Department of Education or from the Federal Direct Student Loan Program.

So here is the nitty gritty…once awarded the loan you don’t have to make any payments on the loan while in school full-time or part-time. Deferment of payment continues for 6 months after the student leaves school. This means you don’t have to pay anything until 6 months after you are done.

This loan is available as a subsidized loan or unsubsidized loan. All students are eligible for unsubsidized loans regardless of financial need. Subsidized loans are set aside for those who demonstrate a real financial need. The government pays the interest while the student is in school on subsidized loans, for unsubsidized loans the student will be responsible for all the interest accrued. About 2/3 of subsidized loans are awarded to families with an AGI (adjusted gross income)of under $50,000.

As of July 2006 the loans are issued under a fixed interest rate.

Federal Perkins Loan:

The Perkins Loan is much like the Stafford loan except that it is a subsidized loan only that is awarded to students that have exceptional financial need. This loan is also a campus-based loan meaning that each school gets a certain amount of funds from the federal government that they can award as Perkins Loans.

This loan has a fixed interest rate of 5%, a 10-year repayment period and a 9 month deferment period. This loan is subsidized so the government pays the interest during the time the student is in school and through the 9 month grace period. This loan has a limit of $4,000 to a student per year and $20,000 lifetime.

For more information on financial aid visit

  • National Credit Union Administration
  • Equal Housing Opportunity

Content of this site is provided as information only and is not intended to serve as advice or representation whatsoever. Investigate these topics further by contacting appropriate advisers.

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