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Kentucky Higher Education Loan Article
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Federal Education Loan Programs
from: Kyle BesserEligibility for federal student loans, except the Federal PLUS loan and unsubsidized Federal Stafford Loan, is primarily based on financial need. Families demonstrate need for federal student loans by completing and filing the Free Application for Federal Student Aid (FAFSA).
The Free Application for Federal Student Aid is the first step in applying for federal student loans offered by the US Department of Education. The Free Application for Federal Student Aid is available from colleges, high school guidance counselors, public libraries and the internet. Only one Free Application for Federal Student Aid needs to be completed each year, even if you are considering several different colleges.
The US Department of Education is in the process of phasing out the paper Free Application for Federal Student Aid. The US Department of Education recommends that students complete the Free Application for Federal Student Aid online. The US Department of Education loan web site has everything you need to know about completing and filing the Free Application for Federal Student Aid and sending your completed Free Application for Federal Student Aid to the schools you want to apply to. You may be able to use the Free Application for Federal Student Aid to apply for state aid and aid through your college as well.
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. A Federal Perkins Loan is awarded to eligible students as part of an aid package at the college. A student will sign a US Department of Education direct loan payment promissory note before receiving the funds. The US Department of Education loan payment promissory note will outline the terms of repayment of the US Department of Education loan.
Check with your counselor or college financial aid officer for up-to-date information on interest rates and US Department of Education direct loan amounts. US Department of Education direct loan amounts are subject to change pending the finalization of legislation before Congress.
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 US Department of Education through private commercial lending agencies such as banks and credit unions. Students can borrow US Department of Education Stafford Loan funds regardless of financial need. If financial need is demonstrated, the federal government may subsidize part or all of the interest on the US Department of Education Stafford Loan 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 US Department of Education Stafford Loan will be unsubsidized, and the student, rather than the federal government, is responsible for the interest on the US Department of Education Stafford Loan while attending school and during grace and deferment periods.
Check with your counselor or college financial aid officer for updated information on US Department of Education Stafford Loan interest rates and US Department of Education Stafford Loan amounts, 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 student 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 Federal PLUS Loans 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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