In the United States Federal student loans are authorized under Title IV of the Higher Education Act as amended. There are a number of programs available, the following information provides background on federal loans as well as an overview of a series of programs offered by the Student Loan Network.

Federal Student Loans

Federal Student Loans supply financial help for students enrolled at schools that participates in federal aid programs. A "school" is defined as a two-year or four-year public or private college, university, or trade school. These loans are offered by private organizations under accordance from the U.S. Department of Education through the Federal Family Education Loan Program (FFELP) and the Federal Direct Student Loan Program (FDLP).

Federal student loans generally cover school expenses, including tuition and fees, room and board, books and school supplies, as well as any transportation. Loans can also help pay for technology needs (i.e., a computer) and for necessary dependent care.

There are a variety of federal student loan programs. Check with your school to see which programs they participate in.

Federal Stafford Loans

Both subsidized and unsubsidized loans are guaranteed by the 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). Both types offer a grace period of six-months, which means that no payments are due until six-months after graduation or three-months after the borrower becomes a less-than-full-time student without graduating. Both types have a fairly modest annual limit. The limit for the academic year beginning in 2007 is $3,500 per year for freshman undergraduate students, $4,500 for sophomore undergraduates, and $5,500 per year for junior and senior undergraduates.

Subsidized Stafford Loan

Subsidized federal student loans are offered to students with a demonstrated financial need: generally requiring a lower family income. For these loans, the federal government makes interest payments while the student is in college. For example, those who borrow $10,000 during college will owe $10,000 upon graduation.

Unsubsidized Stafford Loan

Unsubsidized federal student loans are also guaranteed by the U.S. Government, but the government does not pay interest for the student, rather the interest accrues during college. Those who borrow $10,000 during college will owe $10,000 plus interest upon graduation. For example, those who have borrowed $10,000 and had $2,000 accrue in interest will owe $12,000. Upon graduation, interest will begin accruing on the $12,000. The accrued interest will be "capitalized" into the loan amount, and the borrower will begin making payments on the accumulated total. Students can choose to pay the interest while still in college.

Federal student loans for medical students have a higher limit of $8,500 for subsidized and a $30,000 maximum for unsubsidized Stafford.

Parent PLUS Loan

The Parent PLUS Loan is available to parents of students enrolled at least part-time in a program included within a formal list of participating post-secondary institutions. PLUS loans differ from other federal student loans like the Stafford and Perkins loans in that it can cover a larger amount of the cost of education, has a higher interest rate and the commitment is undertaken by the parent, rather than the student. PLUS Loans are also available for graduate and professional students.

Graduate PLUS Loan

The Graduate PLUS Loan is similar to the Parent PLUS Loan in the way it is an unsubsidized, federally guaranteed loan, up to the cost of education. This loan is taken out in the graduate student's name, on their own signature and credit rating. Federal loan deferment and forbearance options are the same as the Stafford Loan so graduate and professional students can postpone repayment while enrolled at least half-time in a degree or certificate program.

Federal Student Loan Consolidation

After graduation, many students have a series of loans (and payments), through the Stafford, PLUS or Perkins programs. When you consolidate federal student loans into one single loan you realize a reduced monthly payment (up to 53% less), a longer repayment term, and a fixed interest rate. To determine your monthly savings if you were to consolidate your student loans, try this federal student loan consolidation calculator.

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