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  • Federal Student Loans

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    Most families borrow money to help defray the cost of education. In fact, the greatest portion of federal student aid comes in the form of loans.

    Loans may not be as attractive as grants or scholarships, but don't dismiss them outright. A government–sponsored loan is one of the best deals in town.

    Perkins Loans are offered to undergraduate and graduate students with exceptional financial need. Perkins loans are subsidized, meaning the government pays the 5% interest while you attend school. (In other words, you borrow $1,000. After a year, the loan's value is $1,050. The government pays the $50 interest; you still owe $1,000.)

    Repayment begins 9 months after you graduate, after you leave school or if you drop below half-time status.

    Stafford Loans are the most common type of aid conferred to undergraduate and graduate students. They come in two varieties: subsidized and unsubsidized. All students with need may receive unsubsidized Stafford loans.

    The interest rate on a Stafford loan changes each year, but the rate is capped by the federal government. Repayment begins 6 months after you graduate, after you leave school or if you drop below half-time status.

    Parent PLUS Loans are for parents of dependent undergraduates only. They have reasonable, fixed interest rates (those disbursed after July 1, 2006), but they're higher than the rates for both the Perkins and the Stafford. Repayment of these loans begins 60 days after the money is disbursed.

    Parents may borrow up to the cost of attendance minus all other aid. Unlike the Perkins or Stafford loans, eligibility relies on a good credit history. If a parent cannot secure a PLUS loan, the student may qualify for an increase in the limit to their unsubsidized Stafford.

    Graduate PLUS Loans are available to graduate students only, but resemble Parent Plus loans in most other aspects. Before you can take this loan, you must first max out the Stafford loan.

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