Seeking Government-Sponsored Loans

The federal government is, by far, the largest provider of all student financial aid in the United States. It gives out grants and loans of many different sizes and variations. Probably the most common forms of federal aid are the Stanford and the Perkins Loans. The only way to apply for these loans is by filling out the FAFSA, or Free Application for Federal Student Financial Aid form.

Stafford loans come in two different forms. The first is the FFELP, or Federal Family Education Loan Program. These are underwritten, or guaranteed, by the federal government, but the money is actually given by private banks, credit unions and other loan associations. One example of an FFELP loan is the Citibank Student Loan. In the end, students end up paying the loan back to the private lender rather than the government. The second type of Stafford loan is the Federal Direct Student Loan Program, or FDSLP. Money in these loans is lent out directly by the U.S. government to students.

Both of these types of loans are either subsidized or unsubsidized. Subsidized means the government pays the interest while a student is in school. In unsubsidized loans, a student pays all the interest, though they can have these interest payments deferred or postponed until after he or she is out of school. Subsidized loans are reserved only for those students who show they are in need of financial assistance while they are in school. All students are eligible for unsubsidized loans. Students, no matter what the financial need, are all given a limit to how much money they are able to borrow in the form of a Stafford Loan.

Perkins Loans are the other most common type of aid given by the federal government. This is a subsidized loan given only to those with the most extreme case of financial need. Though the federal government is the ultimate lender for a Perkins Loan, colleges and universities are actually the ones that disperse the money to students. Perkins Loans are probably the best loan out there because the interest rate is fixed at 5% and it is completely subsidized. Like the Stafford Loan, the amount of money given through a Perkins Loan is limited.

Parents also have an option for paying for their children's school. The federal government offers a PLUS loan, or Parent Loan for Undergraduate Students. There is no limit to these parent loans and they are set at a fixed interest rate of 8.5%.

Beyond the world of loans, there are also a few other programs to which the federal government kicks in a little extra help to encourage education. One of these programs is the Federal Work-Study Program (FWS). Under FWS, a college student, no matter what level they are in (undergraduate, professional, or graduate), is able to apply for a job, in which 75% of the salary is paid by the federal government. The other 25% is paid by the employer. This program opens up more jobs and more unique opportunities for students who are financially strapped. Other government funded programs are more specific and are individualized to a student in need; they include a variety of fellowships, internships, grants, and loans, which are all paid for by different agencies within the federal government, but outside of the Department of Education.