If you’re in the market for student loans you can pretty much skip your local bank or credit union. Start at your schools financial office. Student loans are almost exclusively done with federal backing. Some of the most common student loans are Federal Perkins loans, Stafford loans and Direct Plus. Federal Perkins loans allow undergraduate students to borrow up to $5,500 each year for undergraduate studies and $8,000 as a graduate student. Federal Perkins loans have limits based on whether or not you’re a grad student or undergraduate student. Graduate students are limited to $60,000 and undergraduate student loans are limited to $27,500. The main benefit of Federal Perkins student loans is a low interest rate of 5% and a generous grace period and flexible repayment terms. Stafford student loans have two main characteristics, subsidized and unsubsidized. Stafford subsidized student loans allow students with greater financial need to receive a subsidy on their loan after completing a Free application for Federal Student Aid or FASFA form. Those students who have less of a financial need can qualify for Stafford unsubsidized loans without completing the FASFA form. The differences between the two have mostly have to do with the way interest is accrued and when the repayment term begins.
Unsubsidized student loans begin accruing interest immediately upon funding. Subsidized student loans begin accruing interest until you’ve completed school or after a deferment period. The amount that is available to borrow is dependent on your educational institution. Even though interest begins accruing immediately with the unsubsidized loans, that interest doesn’t necessarily have to be paid back immediately and can be capitalized into the principal. Direct Plus student loans have many similarities to Federal Stafford loans but are meant for graduate students and professional degree students. Direct Plus loans do require that your complete the FASFA form. Interest is set at a fixed rate of 7.9%.