Different Types of Federal Student Aid
There are six federal student aid programs you should definitely know about. They include the following:
Federal Pell Grants
This is need-based financial aid. The amount of student aid you receive will depend largely on how much it costs to attend the school of your choice. The money for the Federal Pell Grant comes to the school, which then delivers it to you. If you are eligible for this form of student aid, you will receive it regardless of how many other students at the same school also show need for this type of student aid.
Federal Stafford Loan
There are two types of Federal Stafford Loans: subsidized and unsubsidized. The principal balance on these loans are deferred until 6 months after you are out of school. The primary difference between these two is who pays the interest on the loan while you enrolled in school and during grace and deferment periods.
An unsubsidized loan is not based on how much financial aid you need. If you take out an unsubsidized Federal Stafford Loan, you are responsible for the interest that accrues from the time you borrow the loan and the time of repayment. This interest can be capitalized, which means it can be added to the principal amount of the loan and thus be deferred until then, however, you will be responsible for paying interest on the capitalized interest.
A subsidized loan is based on how much financial aid you need. It shares the same interest rates and deferment periods as an unsubsidized loan, however, the main difference is that any interest accrued during that period is paid for by the government.
Federal PLUS Loans
This is financial aid available to parents whose credit ratings qualify. This is non-need based financial aid. These loans have varying interest rates, but it may not exceed 9%. The first payment of interest and principal for this form of financial aid is due 60 days after the loan is fully disbursed and ends no later than 10 years after repayment begins.
Federal Perkins Loans
This is a low-interest form of financial aid with generous repayment options. The grace period is 9 months and you don’t begin this period unless you are less than a half-time student or you finish school.
The generous grace period is supplemented by lax rules on adjusting repayment. Under certain conditions you can defer paying your loans for several months, even years, and finish repaying it later as long as the school that provided the student aid knows about where you are and why you wish to delay repayment.
In addition, this form of financial aid benefits from certain conditions that will exempt you from having to repay your loan at all. They include joining certain law enforcement fields, child or family service agencies, becoming a nurse or medical technician, or serve as a full-time volunteer in certain programs.
William D. Ford Federal Direct Loan Program
This form of financial aid is similar to the FFEL programs, it also consists of subsidized and unsubsidized loans, but the primary difference is in who is providing the loans. Under this financial aid program, the respective amount of student aid is provided by private lenders, such as banks, credit unions, savings and loans, etc..
With the exception of certain repayment options, the terms and conditions of financial aid issued under the Direct Loan Program are identical to those made under FFEL.
Campus-Based Programs
The following types of financial aid are grouped as campus-based programs. The federal government gives out money to participating schools and then they independently decide who to provide student aid for based on need.
Federal Work-Study programs allow schools to provide student aid in the form of jobs for those who need to work to meet some of their educational expenses. Generally, no prior experience is needed for placement in these jobs. You can use your earnings to pay for expenses that come up throughout the school year.
The Federal Supplemental Educational Opportunity Grant is a gift-based student aid to the neediest students, according to federal law. Besides showing need, you must also meet the guidelines the school is required to use when awarding FSEOG.