Federal Student Loans
Four types of federal student loans exist for persons needing money for college. They are subsidized Stafford loans, unsubsidized Stafford loans, Parent PLUS loans, and Federal Perkins loans.
Originally called “Guaranteed Student Loans” (GSL), Stafford loans were re-named in honor of Senator Robert Theodore Stafford, who served as governor of Vermont, as well as a Representative and Senator from that State. There are two types of Stafford loans—unsubsidized and subsidized.
Unsubsidized Stafford loans can be obtained by anyone attending college. A person applying for an unsubsidized Stafford loan does not have to show proof of financial need in order to apply or receive this type loan.
The interest on an unsubsidized Stafford loan begins to accrue at the time of the first loan disbursal, and continues until the loan has been completely repaid.
A subsidized Stafford loan does require proof of financial need before the loan is granted. Further, the Government pays the interest on a subsidized Stafford loan up until the time repayment begins.
Repayment on both subsidized and unsubsidized Stafford loans is expected to begin six months after the borrower leaves school (whether through graduation, deciding to no longer go to college, or after enrollment hours fall below those in which a person is considered to be at least a half-time student).
Parent PLUS loans (PLUS stands for Parent Loans for Undergraduate Students) are applied for and granted to PARENTS of students who are still considered dependants, and are still taking undergraduate courses. It is expected that the money will be used for educational expense purposes, and no other. Acceptance of the application and the amount granted is based on the parents’ credit history.
There is no six-month grace period for repayment of Parent PLUS loans. Parents are expected to begin repaying the loan after the second disbursement has been received.
Federal Perkins loans, named after former Kentucky House of Representatives member Carl D. Perkins, are given to only those students who demonstrate an “exceptional financial need”. The advantages to this type of loan are that it has only a 5% interest rate, and repayment does not begin until NINE months after the borrower has left school. Repayment for other types of Federal loans normally begins after SIX months.
The only possible disadvantage is the fact that one can only receive a MAXIMUM of $2000 each college year. Unfortunately, yearly college expenses are often higher.
