If you need to borrow to finance your education, federal student loans should be first on your menu. Congress and the U.S. Department of Education regulate federal student loans, setting maximum interest rates, borrowing limits, and other important loan terms. These loans come in loads of different flavors. Here's a taste of what you might borrow:
Perkins Loans are for borrowers demonstrating "exceptional financial need" and can be used for undergraduate, graduate, or professional school. These loans are made through schools' financial aid offices, and schools get help with funding from the government. Perkins Loans are delicious if you can get them, because they have no fees and low interest rates.
[Read FAQs about Perkins Loans.]
Subsidized Stafford Loans are for students demonstrating plain old financial need. Subsidized Stafford Loans are yummy, because the government pays the interest that accrues on those loans while the student is still in school (and during certain deferment periods).
Unsubsidized Stafford Loans are available without regard for a student's financial need; anybody can have a bite of that apple. The government doesn't pay the interest on unsubsidized loans, but the loans have fixed interest rates and flexible repayment terms. Students can either pay the interest as it accrues while they are in school or defer the payments and have the interest "capitalized," or added to the principal of the loan. Students must be enrolled in college at least half time to be eligible to borrow Stafford loans, but they don't have to pass any credit check.
[View FAQs about Stafford Loans.]
Parents of "dependent" undergraduate children may borrow Parent PLUS Loans for their children attending school at least half time. Graduate and professional students may borrow Grad PLUS loans. To be eligible for Parent PLUS or Grad PLUS Loans, borrowers must show that they do not have an "adverse credit history." Those with an "adverse credit history" may still borrow PLUS Loans with an eligible cosigner.
[See FAQs about Parent PLUS Loans.]
With a full menu of federal student loans, everyone should be able to find an option that best suits their appetite.
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