For all types of federal student loans, you must fill out the Free Application for Federal Student Aid to apply for the loans. Some loans are need-based, meaning that they are given to students whose families cannot afford college, whereas others are available to all students, regardless of financial need. Using a combination of loans, students can borrow enough money to pay for the full cost of attending school.
The federal Perkins loan program provides money to students with the most financial need. The program is run by individual schools whose financial aid offices distribute the money. As of 2011, undergraduate students can borrow up to $5,500 per year, up to a maximum of $27,500 for all years. Graduate students can borrow up to $8,000 per year, up to a maximum of $60,000, including undergraduate Perkins loans. The interest rate is 5 percent and the federal government pays all interest on the Perkins loans while the student is in school.
Subsidized Stafford Loans
The Stafford federal loan program offers subsidized loans to some students who demonstrate financial need. As with the Perkins loans, the federal government pays the interest on subsidized Stafford loans while the student is in school. As of 2011, undergraduate students can borrow up to $3,500 in their first year, up to $4,500 in their second year and up to $5,500 each subsequent year, for a total of no more than $23,000 for undergraduate studies. Undergraduate Stafford loans for the 2011 to 2012 school year have a fixed interest rate of 3.4 percent. Graduate students can borrow up to $8,500 per year in subsidized Stafford loans to a maximum of $65,500 of subsidized Stafford loans, including undergraduate loans. Graduate student Stafford loans have an interest rate of 6.8 percent.
Unsubsidized Stafford Loans
All students are eligible to obtain unsubsidized Stafford loans at 6.8 percent interest, regardless of financial need. A student's combined subsidized and unsubsidized Stafford loan amounts for each year must be equal to or less than the overall Stafford limit for that year. As of 2011, dependent undergraduates have a limit of $5,500 for the first year, $6,500 for the second and $7,500 for each other year, up to a total of $31,000. Independent undergraduates can borrow more, with limits of $9,500 for the first year, $10,500 for the second and $12,500 for each year after that, up to a total of $57,500. Graduate students can borrow up to $20,500 of Stafford loans each year, with a maximum lifetime Stafford borrowing cap of $138,500.
A few other types of loans bridge the gap between all financial aid received and the cost of attendance. For example, if a student's tuition, room, board and other college expenses total $36,000 for a year and the student has already received $29,000 in grants, scholarships and student loans, the student can borrow no more than $7,000 through other loan programs. Graduate students can bridge the gap with federal PLUS loans, which have a fixed interest rate of 7.9 percent. Undergraduate students will need to turn to private lenders to get student loans to bridge the gap. However, private student loans tend to have significantly higher interest rates than federal student loans.