Pay for College with Student Loans: How Stafford, Perkins, and Plus Federal Student Loans Compare

There are several methods students and parents can use to help pay for college including scholarships, grants, work-study, and student loans. Student loans are one of the most popular methods used to help pay for college, but sorting out the different types and how they are different can be confusing. Some types of student loans include Stafford loans, Perkins loans, and Plus loans.

Stafford Loans

Stafford loans can be either subsidized or unsubsidized. The basic difference is the government will pay the interest that accrues while the student is in school with a subsidized loan. The interest on unsubsidized loans will continue to accrue until the loan balance is paid. Depending on the student loan, the money is borrowed either from a bank or credit union, or from the Department of Education. The interest rate for Stafford loans varies from year to year, but is always set low compared with the general market.

To qualify for Stafford loans the student must enroll at least half-time in school and can be either a graduate or undergraduate student. The grade level of the student controls the exact amount available to borrow on this student loan. The amount subsidized is limited to a certain amount of the total loan value borrowed that year. Financial need is not necessary to qualify for Stafford loans and they may be paid back in up to 25 or 30 years, depending on the type of Stafford loan and the total amount borrowed. In certain circumstances this loan can have many repayment options.

Federal Perkins Loans

Unlike Stafford loans, qualifying for a Perkins loan does not require the student enroll part-time. Rather than borrowing from a financial institution or the Department of Education, the student borrows from the school they are attending. This loan is need-based and is dependent on the funds available from the school as well as the other financial aid available to the student.

Federal Perkins loans can be available for both undergraduate and graduate students. The interest rate on this student loan is five percent and the repayment time frame is tighter than that of Stafford loans. Perkins loans are paid in no longer than 10 years and that may be reduced further depending on the amount borrowed.

Plus Loans

Plus loans are credit-based loans that the student’s parents can get. They cannot be for more than the student’s total cost of attendance (tuition, books, housing, etc.) minus the amount gained through other means such as grants, scholarships, and other student loans. The repayment terms on these loans may be up to 25 to 30 years, depending on the amount borrowed and if they are obtained from a financial institution or directly from the Department of Education.

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