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What are the major federal financial aid loan programs?

The three major federal financial aid programs are the Stafford, Perkins, and PLUS Loan programs.

Stafford Loans are available to both undergraduate and graduate students. These loans come in two forms, subsidized and unsubsidized. Interest starts to accumulate immediately after the funds are disbursed, but with a subsidized loan, the federal government pays the interest on the loan while you are in school, during any deferment periods, and for six months after you graduate, leave school, or reduce your course load to half-time. To qualify for the subsidized loan, you must demonstrate financial need. The unsubsidized version requires no such determination.

For either type of loan, there is a six-month grace period before loan repayment must begin. The interest rate on Stafford Loans issued before July 1, 2006 is variable (adjusted each July) and is capped at 8.25 percent. The interest rate on unsubsidized Stafford Loans issued on or after July 1, 2006 is fixed at 8.25 percent, and the interest rate on subsidized Stafford Loans issued on or after July 1, 2006 is fixed as follows:

6.8 percent for loans first disbursed on or after July 1, 2006 and before July 1, 2008

6.0 percent for loans first disbursed on or after July 1, 2008 and before July 1, 2009

5.6 percent for loans first disbursed on or after July 1, 2009 and before July 1, 2010

4.5 percent for loans first disbursed on or after July 1, 2010 and before July 1, 2011

3.4 percent for loans first disbursed on or after July 1, 2011 and before July 1, 2012

The Perkins Loan is a low-interest, federally guaranteed, and subsidized loan that is available to both undergraduate and graduate students with the lowest expected family contributions. Perkins Loans differ from Stafford Loans in that the school, not the federal government, distributes the money to the students. Each school is given a finite amount of money to distribute among its students. These loans are awarded on a first-come, first-served basis and are based strictly on financial need. Similar to a Stafford Loan, there is a grace period for the repayment of a Perkins Loan.

PLUS Loans are federally guaranteed, unsubsidized loans made to parents with good credit histories who want to help pay for their dependent child's undergraduate education. Graduate and professional students can also borrow under the PLUS Loan program (called GradPLUS Loans). Like the unsubsidized Stafford Loans, PLUS Loans are not based on financial need. Borrowers need only pass a credit check. The interest rate on PLUS Loans issued before July 1, 2006 is variable (adjusted each July) and is capped at 9 percent. The interest rate on PLUS Loans issued on or after July 1, 2006 is fixed at 8.5 percent. PLUS Loans obtained by parents have no grace period; once the funds are dispersed, parents must begin to repay within 60 days of the last disbursement for that academic year. However, graduate borrowers who obtain GradPLUS Loans after July 1, 2008 have a six-month grace period before repayment of such loans must begin.

If you want to be considered for any of the federal financial aid programs, you'll need to fill out a Free Application for Federal Student Aid, or FAFSA. FAFSA forms can be obtained on-line at the Department of Education's website, www.ed.gov. Or, you can contact your local high school, college, or public library for more information.