Subsidized and Unsubsidized Stafford loans are available to undergraduate students, while Unsubsidized Stafford loans are also available to students at the graduate level, and are subject annual and aggregate borrowing limits. Undergraduate loans have lower interest rates than graduates loans, and subsidized loans do not accumulate interest while the borrower is still in school. These interest rates are tied to the 10 year Treasury bond rate, plus a fixed markup. Both are subject to annual and aggregate limits, with subsidized borrowing limits lower than those for unsubsidized loans. Independent students - those over the age of 24, in the military, or who have other unusual circumstances are eligible to borrow more than dependent students. Payments are not required as long as the borrower is in school.
Parents of undergraduate students who attend college are eligible for federal PLUS loans and may borrow an amount up to the cost of the student’s attendance – which includes tuition, housing, and other expenses. Unlike Stafford loans, parents must satisfy a limited credit check. Changes to the credit check made by the Department of Education in Fall 2011 meant many parents were no longer eligible for the loans, and many institutions that relied heavily on PLUS loan revenue faced substantial funding shortfalls.
Graduate students may borrow PLUS loans for themselves under the same terms that the loans are provided to parents of dependent undergraduates. Grad PLUS loans are meant for borrowers who exhaust eligibility for Stafford loans.
All federal student loans can be consolidated into one loan after a borrower leaves school. The interest rate on the loan is fixed and is set at the weighted average of the interest rates on the underlying loans. Consolidation loans also offer extended repayment terms depending on the total value of the loan.
The Perkins Loan program is separate other federal loans. Loans are made to students from lower-income families by a participating college or university. Schools have some discretion in determining which students receive a Perkins loan and the size of the loan offered.
Funding for Perkins loans is provided by the federal government directly to colleges and universities, which must match one-third of the funding. The funding establishes a revolving loan fund, from which new loans are made as older loans are repaid. The federal government also provides separate funding to forgive Perkins Loans if borrowers are employed in certain high-need jobs.