Sara Routhier, Managing Editor and Outreach Director, 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 world o...

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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: Jan 13, 2012

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The U.S. Department of Education provides government-backed federal student loans to individuals looking to pursue a higher education. Applicants are responsible for filling out a Free Application for Federal Student Aid, more commonly known as a FAFSA form. This form lets the government know what a student’s family’s economic situation is like.

To begin the process of obtaining a federal student loan, students should begin with the FAFSA.

[loansform]Federal student loans come in a variety of forms: Perkins, Direct Stafford Subsidized, Direct Stafford Unsubsidized, and Direct PLUS. Each one of these contains different terms, rates, and restrictions, but all are meant to aid individual students in their academic endeavors.

Perkins loans come with a static 5 percent interest rate, and awards up to $5,500 a year for undergraduate study. The total limit for undergraduate study Perkins loans award is $27,500—or five years-worth of financing. For graduate students, $8,000 is awarded, and a maximum of $60,000 is allotted to each graduate student—or seven and half years-worth.

Direct Stafford loans are low interest federal student financing that can be either subsidized or unsubsidized. A subsidized loan are only given to those who demonstrate a financial need (as determined by the FAFSA form). Unsubsidized loans are available to everybody who is eligible, regardless of financial need. The amount awarded for this type of financing depends on whether or not a student is registered as a dependent or independent.

Finally, Direct PLUS loans are a type of student loan that carries a 7.9 percent interest rate. These are available to the parents of students wishing to finance some of their child’s education.