Federal Direct Student Loans are comprised of three primary types of loans, all of which are available through the Free Application for Federal Student Aid (FAFSA) process. They include:
A Federal Direct Stafford Loan is by far the most popular and widely used federal student loan. They go to students who are enrolled at least half-time in a participating institution. Subsidized Stafford Loans are only available to students that demonstrate financial need, which is calculated by subtracting your overall cost of attendance with your expected family contribution, with the federal government paying the accrued interest. Unsubsidized Stafford Loans are available to all students without regard to their economic need, but the student is responsible for paying all the interest. These loans carry a 6-month repayment grace period after graduation. The aggregate lifetime borrowing limits for these loans is $31,000 for dependent undergraduate students who rely on their parents or legal guardians for financial support, and $57,500 for independent undergraduate students who do not receive any family financial support.
The Federal Direct PLUS Loan is for parents of dependent undergraduate students. It is based not on financial need, but on good credit standing alone. The interest rate is capped by the federal government, and there are no annual limits on this loan. Parents may borrow up to the total cost of their child’s education, less any financial aid the student has received. The requested loan amount must be certified by the school. With $640* in average fee savings, the Citizens One Student Loan for Parents is an alternative to Federal Direct PLUS Loan.
Perkins Loans are awarded through the school’s financial aid office, and are repaid directly to the school. Not all students are eligible to receive a Perkins Loan because they are awarded on the basis of demonstrated financial need, which is calculated by subtracting your overall cost of attendance with your expected family contribution. Additionally, amounts are also based on the amount of other aid the student is being given, and the availability of funds at their school. These loans carry a 9-month repayment grace period after graduation. The maximum awarded to undergraduate students under the Perkins Loan is up to $5,500 a year or a lifetime maximum of $27,500 as an undergraduate.
Federal direct student loans are typically repaid over a 10-year period, except in cases where the borrower has requested extended repayment options, which can go up to 25 years.
There is no early repayment penalty on any federal direct student loan.
Generally speaking, the answer is no. Most student financial aid, including federal loans, is tied to the institution you’re attending. So you’ll need to refile your FAFSA and begin the process all over again.
Indeed, it could affect them a lot. Under federal guidelines, you must begin repaying your loans once you graduate, leave school or switch to less than half-time attendance, which is usually defined as anything below 6.0 credit hours.
Simply put, subsidized loans have a lower interest rate, since they are backed by the federal government, which pays the interest while a student is in school. On unsubsidized loans, the borrower pays all the interest, which is sometimes capitalized or folded into the loan.