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. At the current time, all new federal student loans are administered and funded by the U.S. Department of Education (ED) through the William D. Ford Federal Direct Loan Program (Federal Direct Loans). Prior to July 1, 2010, federal student loans were also available through the Federal Family Education Loan Program (FFELP). FFELP was administered by guaranty agencies (e.g., ISAC) and the federal government, with private lending institutions funding the loans. Borrowers may access information about Federal Direct Loans by visiting the Loans page of ED's Federal Student Aid website, or by contacting the college’s financial aid office.
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 (FAFSA). 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 and during grace and deferment periods. All borrowers are responsible for paying the interest during repayment 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
The Federal Perkins Loan Program provided money for students with financial need.
The authority for colleges to make new Federal Perkins Loans ended on Sept. 30, 2017.
Federal Consolidation Loans
Federal Consolidation Loans allow any borrower to combine one or more federal education loan(s) 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.