Stafford loans are available from the federal government. If you receive a subsidized loan, that means the government will pay your interest while you are in school. Subsidized Stafford loans issued for the 2011-12 school year will have a fixed interest rate of 3.4 percent for undergraduate students. After that, the interest rate will be 6.8 percent. Unsubsidized loans have a 6.8 percent interest rate. The loans have yearly limits, which increase with each year of school a student completes. After the student graduates or leaves school, he'll have a six-month grace period before repayment begins. The standard repayment length is 10 years, though a student can extend the repayment period to 25 years.
The Perkins Loan often is the most difficult loan to get. It has a fixed 5 percent interest rate and the federal government pays the interest while the student is in school. After a student leaves or finishes school, she'll have a 9-month grace period before repayment begins. If she returns to school, she can defer the loan. Repayment on a Perkins loan usually takes 10 years.
Parents of a student can apply for a PLUS loan from the federal government. Graduate students or students who are independent can also receive PLUS loans. The interest on PLUS loans is a higher than that of loans issued to students, 7.9 percent as of 2011. A parent or graduate student can only borrow an amount that makes up the difference between the cost of tuition and the amount of aid received. For instance, if school costs $10,000 and the student has received $5,000 in loans, the parent can borrow up to $5,000. Repayment on the loan begins 60 days after its disbursement. Repayment terms range from 10 to 25 years.
Private student loans are available, but they do not offer the same protections or the same low interest rates as federal loans. The amount a student can borrow and the interest rate she'll have to pay may depend on her credit score. Students may also be eligible for federal or private grants, depending on their financial need or academic merit. The federal Pell grant is available to undergraduate students who have extreme need.