There are three categories of federal student aid: grants, loans, and work-study. Grants provide financial aid that does not have to be repaid. Loans provide borrowed money that must be repaid with interest. Work-study allows students to earn money while enrolled to help pay for education expenses.

Your financial aid "package" - the aid your school awards you - is likely to include funds from the federal student aid programs. Note that not all schools participate in all the federal student aid programs the U.S. Department of Education administers. These programs, described below, provide more than $68 billion in aid to help more than 9 million recipients and their families pay for postsecondary education.

• Federal Pell Grants are available to undergraduate students only (with one minor exception for teacher certification students). Grants do not have to be repaid. The maximum Pell Grant for 2004-05 is $4,050.

• Direct Stafford Loans and FFEL Stafford Loans are student loans that must be repaid and are available to both undergraduate and graduate students. If your school participates in the William D. Ford Federal Direct Loan (Direct Loan) Program, the federal government provides the funds for your Direct Stafford Loan through your school. If your school participates in the Federal Family Education Loan (FFEL) Program, a private lender provides the funds for your FFEL Stafford Loan. First-year undergraduates are eligible for loans up to $2,625. Amounts increase for subsequent years of study, with higher amounts for graduate students. The interest rate is variable but never exceeds 8.25 percent. Interest rates are determined in June of each year. From July 1, 2003 through June 30, 2004 the interest rate for a Stafford Loan in repayment was 3.42 percent.

  If you qualify (based on need) for a subsidized Stafford Loan, the government will pay the interest on your loan until your repayment is scheduled to begin and during any deferment periods. You are responsible for paying all of the interest that accrues on an unsubsidized Stafford Loan.
  
  

• FFEL PLUS Loans and Direct PLUS Loans are unsubsidized loans made to parents. FFEL PLUS Loans are made through private lenders; Direct PLUS Loan funds are provided by the federal government through the school . If you are an independent student or a dependent student whose parents cannot get a PLUS Loan, you are eligible to borrow additional Stafford Loan funds. The PLUS Loan interest rate is variable but never exceeds 9 percent. Interest rates are determined in June of each year. From July 1, 2003 through June 30, 2004 the interest rate for a PLUS Loan in repayment was 4.22 percent.
  
  

• Campus-Based Programs are administered by participating schools. There are three of these programs. Federal Supplemental Educational Opportunity Grants are grants available for undergraduates only; awards range from $100-$4,000. Federal Work-Study provides jobs to undergraduate and graduate students, allowing them to earn money to help pay education expenses. Federal Perkins Loans are low-interest (5 percent) loans that must be repaid; the maximum annual loan amount is $4,000 for undergraduate students and $6,000 for graduate students.