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Student loans Going to college can be costly, but student loans are available to help you with the rising costs of college tuition. Several kinds of student loans exist, each with slightly different terms and policies. Federal Perkins Loan A Federal Perkins Loan is low interest and is awarded based on financial need. The school is the lender for these student loans, so they must be repaid directly to the school. There are no fees for Federal Perkins loans, but there are maximum amounts that can be borrowed, both for undergraduate and graduate degrees. As long as you are attending school at least half time, you will not have to make payments on these student loans. Your loan will become due 9 months after you graduate, drop out or go below half time. You may have up to 10 years to repay the loan. If you are unable to make payments, you can request a deferment. Deferment means that you can stop making payments on your student loans for a time and no interest accrues. Even if you are not eligible for deferment, you may be able to receive forbearance. Forbearance is similar to deferment except that interest will continue to accrue and you are responsible for it. Stafford Loans Stafford Loans are another type of financial aid for students. In order to receive this type of student loans, you have to be a regular student enrolled in an approved program and attend school at least half time. Other eligibility requirements may apply. There are two kinds of Stafford Loans: subsidized and unsubsidized. It is possible to receive both types of student loans during the same enrollment period. Subsidized loans are awarded on the basis of financial need; unsubsidized loans are not dependent on need. The interest on subsidized loans is paid by the federal government while you are in school, which means you are not responsible for interest on these loans until after the grace period (6 months). The interest on unsubsidized loans, however, is due from the time you receive the loan until it is fully paid. It is best to pay the interest on unsubsidized loans from the beginning, because if you allow it to accrue while you are enrolled or during times of deferment, it may be capitalized. This means that the interest due is added to the total amount of the loan and interest is then calculated on the new amount. If you allow the interest to be capitalized, you will end up paying more overall on your student loans. Interest rates on Stafford Loans are variable, meaning that they might change each year; however, the government has set the maximum amount at 8.25 percent.
Annual maximum amounts apply, and vary based on your year of study and whether you are considered a dependent or independent student. If you choose a Stafford Loan, you will be charged a fee of up to 4 percent of the loan. This money goes to the federal government and the guarantee agency to help reduce the cost of student loans.
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