Student Loans

Financial Wellness

Federal Student Loan Programs 101

The Federal Direct Student Loan Program (Direct Loan Program) is funded by the federal government and provides long-term, low-interest loans to students and parents.

There are different types of Direct Loans. They vary according to who is eligible, the amount awarded, when payment of interest and/or principle is due, and whether and when loan interest accrues and who pays it. For additional details on each distinct type of Direct Loan, click on the following loan names:

Direct Subsidized Loans are made to undergraduate students who demonstrate financial need. With this particular loan, the federal government pays the interest during certain periods when repayment by the borrower isn’t required. (The loan gets its name from the government assistance—called a subsidy—provided to the borrower.)

Direct Unsubsidized Loans are made to undergraduate, graduate, and professional-school students who do not demonstrate need or who need additional funds after they’ve received the maximum Direct Subsidized Loan. The student is responsible for payment of all interest that accrues from the date of the first disbursement and throughout the life of the loan.

Direct PLUS Loans are made to parents of dependent students and to graduate and professional-degree students. Unlike other Direct Loans, eligibility for these loans may be based in part on the borrower’s credit history and ability to repay. Grace and deferment periods are available on PLUS loans, but interest continues to accrue. Be sure to stay up to date on the interest rates, annual loan limits, and origination fees.

Federal Direct Parent PLUS loans are borrowed by parents of dependent undergraduate students. It is based on credit history, has a 7.9% interest rate, and a 4.204% origination fee is assessed at the time of disbursement. There is no grace period, and interest accrues after disbursement. You may contact loan servicer to request a deferment while enrolled at least half-time.

Federal Direct Graduate PLUS loans are borrowed by graduate and professional degree-seeking students. It is credit-based, has a 7.9% interest rate, and a 4.204% origination fee is assessed at the time of disbursement. There is no grace period, and interest accrues after disbursement. You may contact loan servicer to request a deferment while enrolled at least half-time.

Federal Perkins Loans provide low-interest loans to undergraduate, graduate, and professional-degree students with high financial need. They’re distributed by the school based on the financial needs of its students and the amount of funds it has available. Interest does not accrue and loan payments are not required until the student enters repayment following a nine-month grace period after graduation or when the student ceases to be enrolled at least half time.

More information on Federal Student Loans can be found on the Federal Student Aid website. In order to receive any student loans you must complete the FAFSA.

Information provided by CashCourse, www.cashcourse.org

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