Federal Perkins Loans

These loans are offered to students who demonstrate the greatest financial need; Federal Pell Grant recipients get top priority. You can be enrolled full time or part time. Each school participating in the program receives a certain amount of Perkins funds each year from the U.S. Department of Education. When all those funds are used for that award year, no more Perkins Loans can be made for that year. You repay these loans to your school.

Stafford Loans

These loans are for undergraduate or graduate and professional students and are made through one of two U.S. Department of Education programs:

• William D. Ford Federal Direct Student Loan Program—referred to as Direct Loans or Direct Stafford Loans. Funds for Direct Loans come from the U.S. Department of Education and are delivered to you through your school. You repay these loans to the Department.
• Federal Family Education Loan (FFEL) Program—referred to as FFEL Stafford Loans or Federal Stafford Loans. Funds will come from a bank, credit union, or other lender that participates in the program. You repay these loans to your lender or its servicing agent.

Whether you borrow a Direct or a FFEL Stafford Loan depends on which program the school you attend participates in. Most schools participate in one or the other, although some schools participate in both. It's possible for you to receive FFEL and Direct Stafford Loans, but not both types for the same period of enrollment at the same school.

For both types of Stafford Loans, you must be enrolled at least half time. You don't have to demonstrate financial need but, if you do, the government will pay the interest on your loan during certain periods.

PLUS Loans

These are loans parents can take out for their dependent undergraduate children who are enrolled as at least half-time students. (Click here for information on dependency status.) The loans are made through the Direct Loan and FFEL programs mentioned above and are known either as Direct PLUS Loans or FFEL (or Federal) PLUS Loans. Click here for information on PLUS Loans.

What are the differences in these loan programs?

See the chart below for a quick comparison.

Student Loan Comparison Chart

How do I apply for a Perkins or Stafford Loan?

You just need to complete the Free Application for Federal Student Aid (FAFSA). But, you will need to sign a promissory note, a binding legal document that says you agree to repay your loan according to the terms of the note. Read this note carefully and save it.

How much money can I get?

Perkins Loans—See the chart above.

FFEL or Direct Stafford Loans—See the chart below.

NOTE: You can't borrow more than your cost of attendance minus the amount of any Federal Pell Grant you're eligible for and minus any other financial aid you'll get. So, you might receive less than the annual maximum amounts given in the chart. Note that there are no minimum award amounts.

When you look at the chart, you'll see that your loan limits also depend on whether you receive "subsidized" or "unsubsidized" Stafford Loans.

Subsidized Stafford Loan
If you demonstrate financial need, you can receive a subsidized Stafford Loan to cover some or all of that need. If you get a subsidized loan, the U.S. Department of Education pays the interest while you're enrolled in school at least half time, for the first six months after you leave school, and during a period of deferment—a postponement of loan payments.

The amount of your subsidized loan can't exceed your financial need.

Unsubsidized Stafford Loan
You might be able to receive loan funds beyond your subsidized loan limit or even if you don't have demonstrated financial need. In that case, you'd receive an unsubsidized loan. For this type of Stafford Loan, you're responsible for the interest from the time the loan is disbursed to you until it's paid in full. The government does not pay your interest.

Talk with the school(s) you're interested in to find out what kind of Stafford Loan you can get and how much you qualify for.

Maximum Annual Loan Limits for Subsidized and Unsubsidized Direct and FFEL (Federal) Stafford Loans

NOTE: For periods of study shorter than an academic year, the amounts you can borrow will be less than those listed. Also, you might receive less if you receive other financial aid that’s used to cover a portion of your cost of attendance.

How will I get my loan funds?

Perkins—Your school will either pay you directly (usually by check) or credit your account. Generally, you'll receive the loan in at least two payments during the
academic year.

Stafford—Your school will disburse your loan in at least two installments; no installment will be greater than half the amount of your loan. If you're a first-year undergraduate student and a first-time borrower, your first disbursement can't be made until 30 days after the first day of your enrollment period.

Your Perkins or Stafford Loan money must first be used to pay for your tuition, fees, and room and board. If loan funds remain, you'll receive them by check or in cash, unless you give the school written permission to hold the funds until later in the enrollment period.

Other than interest, is there any charge associated with these loans?

• Federal Perkins Loans—No.
• Direct and FFEL Stafford Loans—Yes, you'll pay a fee of up to 4 percent of the loan, deducted proportionately from each loan disbursement. Because of this deduction, you'll receive slightly less than the amount you're borrowing.

So, when do I start repaying my loans?

After you graduate, leave school, or drop below half-time status, you must begin repayment. You have a period of time, however, called a grace period, before you must start making payments.

• Federal Perkins Loans—The grace period is nine months (if you're attending less than half time, check with the financial aid administrator at your college or career school to determine your grace period).
• Direct or FFEL (Federal) Stafford Loans—The grace period is six months.

How much time do I have to repay?

• Federal Perkins Loans—Up to 10 years
• Direct and FFEL Stafford Loans—Your repayment period varies from 10 to 30 years depending on whether the loan is a FFEL or a Direct Stafford Loan and depending on which repayment plan you choose. When it comes time to repay, you can pick the plan that's right for you.

The choices are:

• A 10-year plan with a minimum monthly payment of $50;
• A graduated plan with a monthly payment that starts out low and then increases gradually during the repayment period;
• An extended plan that allows you to repay your loan over a longer period; or
• A plan that bases the monthly payment amount on how much money you make. (Direct PLUS Loan [parent] borrowers are not eligible to repay their loans under this plan.)

You'll get more information about repayment choices before you leave school and, later, from the holder of your loan.

What if I have trouble repaying my loan?

Under certain circumstances, you can receive a deferment or forbearance on your loan.

Deferment—Your payments are postponed. Interest does not accumulate unless you have an unsubsidized Stafford Loan. If you have an unsubsidized Stafford Loan, you must pay the interest. You must meet specific conditions to qualify for a deferment. For example, you can receive a deferment while you're enrolled in school at least half time. You'll receive more information before you leave your college or career school, and you'll also get information from the holder of your loan.

Forbearance—Your payments are postponed or reduced. Interest continues to accumulate, however, and you are responsible for paying it, no matter what kind of loan you have. Your lender usually grants forbearance if you don't qualify for a deferment.

Deferment and forbearance periods don't count toward the amount of time you have to repay.

You must apply to the holder of your loan for either deferment or forbearance. Note that you must continue to make payments until you're notified your request has been granted. If you don't, you might end up in default.

What is default?

Default occurs when you don't repay your loan according to the terms you agreed to when you signed the promissory note for your loan. Defaulting on a student loan has very serious consequences. Listed below are some of them:

• You'll be ineligible for additional federal student aid.
• You'll be ineligible for deferment or forbearance on your loan.
• Your credit record will be damaged, which can interfere with buying what you need, like a car.
• You might have trouble getting a job.
• Legal action can be taken against you to recover what you owe.

The last thing you want to do is default! If you ever have trouble making payments, contact the holder of your loan right away to discuss options to help you out.

Are there any situations where my loan could be canceled?

Your loan can be canceled for certain specific circumstances, such as your death or total and permanent disability. You also might qualify to have your loan canceled because of the work you do once you leave school (teaching in a low-income school, for example). You'll receive more information on cancellation provisions before you leave your college or career school.

If you want to read more about deferment, forbearance and cancellation, read our publication The Student Guide. You can access the guide at www.studentaid.ed.gov/pubs or call 1-800-4-FED-AID (1-800-433-3243) for a copy. For even more detailed information, go to our Web site at www.studentaid.ed.gov and click on the Repaying tab.