Federal Loans and Grants
Call the Federal Student Aid Information Center at 1-800-433-3243 to request a free copy of Funding Education Beyond High School: The Guide to Federal Student Aid, which provides information on government loans and grants. You can also obtain a copy online at www.studentaid.ed.gov. Also call your state higher education agency which can give you additional information about obtaining loans and grants in your state.
What is a Pell Grant?
Here are some basic eligibility requirements for a Federal Pell Grant:
What is a Stafford Loan?
Stafford Loans are federal loans made by the government, meaning you’re borrowing directly from the U.S. Department of Education.
To further understand the world of Stafford Loans, it’s best to begin with a basic knowledge of the key terms:
Who is eligible?
Generally speaking, these loans are among the easiest to obtain because, unlike private student loans, the government doesn’t assess your credit or ability to repay them (which, for young people who are just entering the world of financial decision making, can be a positive thing).
Most students who qualify for aid are eligible for Stafford Loans. To be eligible, a borrower is required to:
For both subsidized and unsubsidized loans, the borrower’s school determines the amount that can be borrowed based on the cost of attendance and other financial aid a student receives.
Borrowing Limits and Time Limits
Here’s a breakdown of what undergraduate students can borrow, per year, in unsubsidized Stafford Loans:
Both undergrads and graduate students can take these loans out, unlike subsidized Stafford Loans, which are only available to undergrads. Graduate students attending graduate or professional school also have higher borrowing limits ($20,500 annual for grad school, $138,500 lifetime, and $40,500 annual for medical school, $224,000 lifetime).
What is a Federal Supplemental Educational Opportunity Grant (FSEOG)?
Almost $1 billion in FSEOG funding is awarded each year to approximately 1.6 million undergraduate students. The maximum grant is $4,000.
What is a Direct PLUS Loans?
The Federal PLUS Loan is an unsubsidized federal education loan for graduate students and for parents of dependent undergraduate students. The Federal PLUS Loan, also known as a Federal Direct PLUS Loan, is available after the student exhausts eligibility for Federal Stafford Loans.
There are two versions of the Federal PLUS Loan: the Federal Parent PLUS Loan and the Federal Grad PLUS Loan.
Other than the differences in the borrower, the purpose of the loan and some discharge provisions, the Parent PLUS and Grad PLUS loans are nearly identical. The Federal Grad PLUS Loan first became available on July 1, 2006, through an amendment to the Federal Parent PLUS Loan.
The Federal PLUS Loan is an unsubsidized loan. Interest begins accruing immediately after disbursement. The federal government does not pay the interest on the Federal PLUS Loan.
If the interest is not paid as it accrues, it will be added to the loan balance (capitalized) when the loan enters repayment. This increases the amount of debt. After interest is capitalized, interest will be charged on the interest, causing the loan to grow faster.
The Federal PLUS Loan has an annual limit equal to the college’s cost of attendance, minus other aid received. The Federal PLUS Loan does not have an aggregate loan limit. The student’s college will determine how much the parents can borrow through the Federal Parent PLUS loan or a graduate student can borrow through the Federal Grad PLUS loan.
Borrowers of the Federal PLUS Loan must not have an adverse credit history.
Otherwise, there is no requirement that a PLUS loan borrower have good credit, such as a high credit score, minimum income threshold or low debt-to-income ratio.
The credit criteria for a PLUS loan are backward-looking, considering whether the borrower has had financial difficulty in the past. The PLUS loan does not consider the borrower’s future ability to repay the debt.
As with Federal Stafford Loans, the student must be enrolled at least half-time and be making satisfactory academic progress, such as maintaining at least a 2.0 GPA on a 4.0 scale in college. Filing the Free Application for Federal Student Aid (FAFSA) is also required before the student or parent can receive any federal education loans.
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