Federal Student Loans: Which Options Are The Most Desirable?

If you are in need of financial assistance to help put you through college, you may be looking at all of the different options available to you and trying to figure out what the best option or options are for loans. Federal loans available to students (as opposed to types of loan parents of students can take out to help pay for their kids' education, such as Parent PLUS Loans) are, most commonly the Perkins Loan and the Stafford Loan. These have different terms and conditions and different qualification criteria.

For both types of loan, you need to be enrolled in an eligible school on at least a half-time basis, working towards either an undergraduate or post graduate degree with a declared major. You have to be eligible for federal assistance, which means you need to be a US citizen, national, or have permanent residency or another kind of special status if you are a foreign national. These conditions are the same for both the Perkins loan and the Stafford loan.

Where the loans differ, is in the amount available and the interest rate, and also how easy they are to qualify for.

The Perkins loan is designed for the students least equipped to pay for their own education. This means that it has the lowest rate of interest at 5% APR, which is fixed for the length of your loan. Other benefits with this loan are that it can be deferred while you are still studying, and when you graduate it has the longest grace period between when you graduate and when you have to start making repayments on your loan, allowing you the most time to find a job and establish yourself financially before you have to deal with the outgoings every month to clear your debt, at nine months.

The maximum amount you can borrow with a Perkins loan, which may not be offered to all who are accepted to be awarded one, is $4000 a year for undergrad students and $6000 a year for people on post graduate courses. This can run to a maximum of $20,000 over the entire duration of your undergraduate career, or $40,000 for your post graduate lifetime.

This is generally considered to be the most desirable loans to get, if you can, because the rate is so much better than other loans and the grace period is longer than that of the Stafford loan, which only gives you six months to establish yourself in a job before you have to start making your repayments.

Because of this, there is usually fierce competition to get a Perkins loan. You will have to demonstrate and be able to prove that compared with other students, you have a significant need for this product. If you can do this, you may be offered a Perkins loan of anything up to the maximum amount applicable to your type of study. There is no credit check, but you will need to show that you are comparatively deserving of this loan.

If you want to apply for a Perkins loan, you should get your submission in as early as you possibly can. You need to submit the FAFSA form, which is used to determine what financial aid a student can be given. This form is also the starting point if you want to apply for a Stafford loan, which is easier to qualify for so will be your next best option if you can't get a Perkins loan. This form can be completed online, and takes around an hour to complete.