Will the Government Help Me Pay for School?
The U.S. government makes several different kinds of loans available to students to help pay for their education. Most of these federal student loans are offered at low rates of interest and do not require collateral or a review of your credit. There are also various repayment terms, depending on your individual financial situation and the type of loan that you use.
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Grants and Scholarships
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The federal government has dozens of grants and scholarship programs that benefit students at undergraduate and graduate levels. These programs come under different names, such as the Health Professions Scholarship Program and the Woodrow Wilson Center Fellowships, and are usually targeted at a particular field of study or students from a specific social and/or educational background. Grants are disbursed according to need; the largest federal program is the Pell Grant, which awards more than five million students a year with an average grant of about $2,620.
Stafford Loans
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Stafford loans are extended directly to students to supplement other income or assets they are using to pay for their education. In general, the higher your academic level, the higher the loan limit. Loan limits also depend on your status as a dependent or independent student (one not relying on support from their family).
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Subsidized Loans
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Some Stafford loans are subsidized, depending on your family's financial situation. The government pays interest on subsidized loans while you are in school. You must pay all the interest yourself on unsubsidized loans. For some loans, interest payments can be deferred until after you graduate or end your attendance voluntarily. Unsubsidized loans have higher limits and interest rates.
Perkins Loans
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Perkins loans are available to graduate and undergraduate students who can demonstrate financial need. The federal government makes the loan funds available to the school of your choice, which lends the money to you at an annual interest rate of 5 percent. The loan limit is $4,000 per year for undergraduate students, and $27,500 throughout your undergraduate career and $8,000 per year for graduate students. The Perkins limit for all undergraduate, graduate and/or professional study is $60,000. Repayments begin nine months after you graduate or drop below a half-time schedule.
PLUS Loans
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PLUS loans are available directly to parents of undergraduate or graduate students who are studying at least half-time in a participating college or university. These loans carry higher interest rates than Perkins and Stafford loans and must be repaid by the parents. A PLUS loan can also be taken out by a graduate student and carries the same basic features as the Stafford loan that allows deferred payments.
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