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Types of Loans

If the decision is made to take out a loan to help finance education, there are both student and parent loan programs available. Effective July 1, 2010, all new federal student loans will be administered by the U.S. Department of Education (ED) under the William D. Ford Federal Direct Loan Program (Federal Direct Loans). For information regarding Federal Direct Loans, refer to ED's Direct Loan Program website. The types of educational loans currently offered through the Federal Direct Loan Program are defined below:

Federal Subsidized Stafford Loan Program

Subsidized Stafford Loans are awarded to students who demonstrate financial need determined by filing the online Free Application for Federal Student Aid (FASFA). Because the U.S. Department of Education subsidizes the interest, borrowers are not charged interest while they are enrolled in school at least half time and during grace and deferment periods.

Federal Unsubsidized Stafford Loan Program

Unsubsidized Stafford Loans are awarded to students regardless of financial need. Borrowers are responsible for paying the interest that accrues during any period. Independent students and students whose parents cannot get a Federal PLUS Loan have higher unsubsidized loan limits. Students will be considered for a subsidized Stafford Loan before being considered for an unsubsidized Stafford Loan.

Federal PLUS Loans

Federal PLUS loans allow parents to borrow on behalf of their dependent undergraduate students, or graduate and professional students to borrow on their own behalf. All students must be enrolled on at least a half-time basis. As with unsubsidized Federal Stafford Loans, borrowers are responsible for the interest that accrues on the PLUS loans throughout the life of the loan.

Federal Perkins Loans

Federal Perkins Loans have a low interest rate and a longer grace period than the other educational loans, and allow borrowers up to $5,500 (undergraduate study) or $8,000 (graduate study) annually. This loan is available to undergraduate and graduate students who demonstrate exceptional financial need, and must be repaid to the school with the low interest rate of five percent.

Federal Consolidation Loans

Federal Consolidation Loans allow any borrower to combine one or more federal education loans into a new loan to facilitate repayment. The process of consolidating loans usually does not directly involve the school – the consolidating lender purchases qualifying student loans from other lenders and combines them into a single new loan.

Alternative (Private) Loans

Alternative or private loans are also available to students and parents. These loans are available to help families cover the Expected Family Contribution (EFC) calculated from the FAFSA.