Understanding federal student loans
The U.S. Department of Education offers two federal student loan programs:
1.The William D. Ford Federal Direct Loan (Direct Loan) Program.
2.The Federal Perkins Loan Program.
The William D. Ford Federal Direct Loan Program, also known as the Federal Stafford loan, is the largest and most popular federal student loan program. Under this program, the ED is your lender. There are four types of direct loans available:
- Direct Subsidized Loans are loans made to eligible undergraduate students who demonstrate financial need to help cover the costs of higher education at a college or career school.
- Direct Unsubsidized Loans are loans made to eligible undergraduate, graduate and professional students, but in this case the student is not required to demonstrate financial need to be eligible for the loan.
- Direct PLUS Loans are loans made to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other financial aid.
- Direct Consolidation Loans allow you to combine all of your eligible federal student loans into a single loan with a single loan servicer.
To find out the annual award limits for each of these loans, click here.
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The Federal Perkins Loan Program, often called Perkins Loans, is a school-based loan program that offers low-interest loans to help undergraduate and graduate students with exceptional financial need. It is a subsidized loan made by colleges and universities, which means the school is your lender. The loan is made with government funds, and your school contributes a share.