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Federal PLUS Loan Article
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Federal Financial Aid Programs
from: Kyle BesserEligibility for federal student aid programs, except the Federal PLUS loan and unsubsidized Federal Stafford Loan, is primarily based on financial need. Families demonstrate need for federal student aid by completing and filing the Free Application for Federal Student Aid (FAFSA).
The FAFSA is the first step in applying for federal aid offered by the U.S. Department of Education. The FAFSA is available from colleges, high school guidance counselors, public libraries and the internet. Only one FAFSA needs to be completed each year, even if you are considering several different colleges.
The U.S. Department of Education is in the process of phasing out the paper FAFSA and recommends that students complete the FAFSA online. The FAFSA web site has everything you need to know about completing and filing the FAFSA and sending your completed FAFSA to the schools you want to apply to. You may be able to use the FAFSA to apply for state aid and aid through your college as well.
Federal Pell Grant
The Federal Pell Grant is the largest single federal student aid program. Federal Pell Grants are awarded to students demonstrating high financial need. Using FAFSA data, financial need is determined according to the Federal Methodology, which is a formula established by Congress to assess the family's ability to contribute to the student's educational costs. For each eligible student, the Department of Education forwards federal student aid funds to the school, which are then placed in the student's account at the school or paid directly to the student. The maximum award varies annually according to the level of federal student aid funding.
Federal Perkins Loan
The Federal Perkins Loan is a federally funded campus based loan that is administered by the college aid office. Students do not apply separately for the Federal Perkins Loan. Federal Perkins Loans are awarded to eligible students as part of a financial aid package at the college. A fixed 5% interest rate is charged annually after completion of studies, and a grace period is specified in the promissory note. Check with your counselor or college financial aid officer for up-to-date information on interest rates and loan amounts, which are subject to change pending the finalization of legislation before Congress.
Federal Supplemental Educational Opportunity Grant (FSEOG)
An FSEOG is a federal campus based grant awarded to students who demonstrate significant financial need. Like the Federal Perkins Loan, students do not apply separately for FSEOG. FSEOG is awarded to eligible students as part of the aid package at the college.
Federal Work Study (FWS)
Federal Work Study is a part-time work program awarding on-campus or off-campus jobs to students who demonstrate financial need. FWS positions are primarily funded by the government but also partially funded by the institution. FWS is awarded to eligible students by the college as part of the student's financial aid package. The maximum FWS award is based on the student's financial need, the number of hours the student is able to work, and the amount of FWS funding available at the institution. The amount you earn can't exceed your total FWS award.
Federal Family Education Loan Program
The Federal Family Education Loan Program encompasses two separate loan programs: a student loan known as the Federal Stafford Loan and a parent loan known as a Federal PLUS Loan. A FAFSA must be filed for Federal Stafford Loan consideration. Check with your counselor or college financial aid officer for updated information on interest rates and loan amounts, which are subject to change pending the finalization of legislation before Congress.
Federal Stafford Loan
A Federal Stafford Loan is a long-term, low interest rate loan administered by the Department of Education through private commercial lending agencies such as banks and credit unions. Students can borrow Federal Stafford Loan funds regardless of financial need. If financial need is demonstrated, the federal government may subsidize part or all of the interest while the student is in school and during grace and deferment periods. If the student does not demonstrate financial need, part or all of the loan will be unsubsidized, and the student, rather than the federal government, is responsible for the interest while attending school and during grace and deferment periods.
The interest rate on subsidized federal Stafford loans will be reduced to 6% on July 1, 2008, and decrease annually until it reaches 3.4% on July 1, 2011. An additional cost of borrowing is an origination fee, which will be standardized and phased down annually until it is eliminated in 2010. Check with your counselor or college financial aid officer for updated information on interest rates and loan amounts for federal Stafford loans, which are subject to change pending the finalization of legislation before Congress.
Federal PLUS Loan
A Federal PLUS Loan is a long-term, variable interest rate federal loan that is capped currently at 8.5%. A Federal PLUS Loan is available to the parents of dependent students. Like Federal Stafford Loans, Federal PLUS loans are administered by the Department of Education through private commercial lending agencies. There is no set limit on the amount of Federal PLUS funds that a parent may borrow, but the maximum loan cannot exceed the student's portion of the cost of education minus any other aid the student receives.
Federal PLUS loans are not subsidized, and eligibility is not based on financial need. Repayment usually begins immediately after the entire loan is disbursed. Federal PLUS Loans, like Federal Stafford Loans, have a phased down origination fee that will reduce by .5% annually until it is eliminated in 2010. Check with your counselor or college financial aid officer for updated information on interest rates and loan amounts, which are subject to change pending the finalization of legislation before Congress.
William D. Ford Federal Direct Loan Program
The William D. Ford Federal Direct Loan Program is a program almost identical to the Federal Family Education Loan Program, except that the federal government is the lender and the funds are delivered directly to the school. If the college the student plans to attend participates in the Federal Direct Loan Programs, the student will apply for a Federal Direct Stafford Loan and/or a Federal Direct PLUS Loan rather than a Federal Stafford or Federal PLUS Loan.
Federal Direct Stafford Loan applicants must file a FAFSA and, if eligible, must complete a promissory note provided by the college. Federal Direct PLUS Loan applicants must complete an application available at the college. Check with your counselor or college financial aid officer for updated information on interest rates and loan amounts, which are subject to change pending the finalization of legislation before Congress.
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