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How Federal Financial Aid Organizations Work

Loan Options

If, after exhausting your opportunities for grants and campus-based aid, you still need money for college, the government also offers loans. These are loans based on financial need that do need to be repaid with interest. In fact, you start paying them six months after you graduate, leave school or stop going to school at least half-time.

Students can get what's called a Stafford Loan. The type of Stafford Loan you get depends on which federal program your school participates in. Students in the Federal Family Education Loan (FFEL) Program get their loans from private financial institutions, while those who participate in the William D. Ford Direct Loan Program (also known as simply the Direct Loan Program) get their loan money directly from the government. Once you get the loan, you should expect to go through counseling when you start and finish school to understand how the loan works and choose which one of four repayment options you prefer.

Undergrads who qualify as dependents on their parents' tax return can ask them to apply for a PLUS Loan, or Parent Loan. Parents can apply for these loans through either the FFELP or the Direct Loan Program. This application process usually requires a credit check and a demonstrated need for financial aid. A PLUS Loan adds on to any financial aid you've already received, and the total amount of all of these awards can't exceed the cost of your schooling. Parents can choose to repay these loans either 60 days after the loan is paid out, or they can wait until six months after their child graduates or is no longer at least a half-time student.

Graduate and professional degree students may also participate in the PLUS Loan program, but they must have a good credit history and begin repaying the loan on the date of its last disbursement.

Now that you know about the different types of federal financial aid out there, let's look at the process of actually getting the money.