Sara Routhier, Managing Editor of Features and Outreach, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming worl...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Sep 7, 2011

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There are four major types of federal student loans: Perkins, Direct Stafford Unsubsidized, Direct Stafford Subsidized and Direct PLUS. There are also private loans that are available from many banks and companies with which students can fund their education, however, the loans listed here are those that are available through the U.S. Department of Education. The types of loans vary in terms of who qualifies, the amount available, interest rates and repayment plans.

The first kind of student loan, a Federal Perkins Loan, is a 5 percent interest loan for up to $5,500 a year for undergraduate and $8,000 a year for graduate study. The total limit for undergraduate study is $27,500 and $60,000 for combined undergraduate and graduate loans. This loan is granted through the school’s financial aid office, meaning that although they are federal funds, the student must repay the loan to his or her school.

A Direct Stafford Loan is a low interest loan a student receives directly from the U.S. Department of Education. These loans can be subsidized, for those who demonstrate financial need, or unsubsidized, for which anyone is eligible. Subsidized loans do not accrue interest while the student is in school, while unsubsidized loans accumulate from the first disbursement. The maximum amount of money that a student can receive is based on the student’s year in school and whether the student is a dependent or an independent.

Parents are eligible to apply for a Direct PLUS Loan from the Department of Education. A PLUS loan has a 7.9 percent interest rate from the first disbursement and is limited annually to the student’s cost of admission minus any additional financial aid.