Federal Loan Programs Available to Students & Parents:
Federal Loan Programs
To support and encourage higher education for a greater number of families,
the federal government provides a number of grant and loan programs with
very favorable conditions. While most of these aid sources must be repaid,
they provide a low-interest alternative to private loans and, if used wisely,
can be an excellent option for students and their parents to fund college
and university study.
For the 2010-2011 academic year, the maximum Pell grant is $5,550.
The amount that students receive depends on their financial need, the cost to attend school, and whether they study full or part-time.
To determine your eligibility for a Pell Grant (and other types of federal funding, such as Perkins and Stafford loans), you will need to file the FAFSA (Free Application for Federal Student Aid). The FAFSA is available online at www.ed.gov. It must be filed every year.
A Stafford Loan allows dependent undergraduates to borrow up to $5,500 to pay for their first year of studies. Of this amount, $3,500 is subsidized.
Students can then borrow $6,500 for their sophomore year.
Of this amount, $4,500 is subsidized and $7,500 for each remaining year ($5500 subsidized).
Independent students can borrow an additional unsubsidized $4,000 for each of the first two years and an additional $5,000 for each of the remaining years of their studies.
Parents of undergraduate students, and graduate and professional degree students can borrow through the Direct PLUS Loan program to help cover education expenses.
The terms and conditions of PLUS loans include: a determination that the applicant does not have an adverse credit history; and a fixed interest rate of 7.9% for Direct PLUS Loans. Student applicants (but not parents) are required to complete the FAFSA. In addition, before you can receive a PLUS Loan, your school must have determined your maximum eligibility for Direct Subsidized and Unsubsidized Stafford Loans.
Note: Before July 1, 2010, Stafford, PLUS, and Consolidation Loans were also made by private lenders under the Federal Family Education Loan (FFELSM) Program. As a result of recent legislation, no further loans will be made under the FFEL Program beginning July 1, 2010. All new Stafford, PLUS, and Consolidation Loans will come directly from the U.S. Department of Education under the Direct Loan Program.
For a PLUS Loan, you must complete a Direct PLUS Loan Application and Master Promissory Note (MPN). The MPN is a legal document in which you promise to repay the loan and any accrued interest and fees. It also explains the terms and conditions of the loan. In most cases, one MPN can be used for loans that you receive over several years of study, although a separate Loan Request must be filed for each school year. If you previously signed an MPN to receive an FFEL PLUS loan, you will need to sign a new MPN for a Direct PLUS Loan.
Your school's financial aid office can provide instructions on how to apply for a PLUS Loan and may offer the option of completing the PLUS application and MPN online at www.studentloans.gov.
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