Department Of Education Student Loans

Department of Education student loans are set to become the primary source of loans for students after new laws implemented by President Barack Obama in early 2010.

Previously students received student loans from banks and other private lenders. According to the new program, most students will now receive loans directly from the U.S. Department of Education. Such loans are also known as Federal Student Loans and are part of the Federal Student Aid program along with grants , campus-based aid and other assistance.

Students apply for Department of Education student loans using the standard Free Application for Federal Student Aid (FAFSA), which is available online (http://www.fafsa.ed.gov/). The application process is handled by your campus financial aid office.

The Department of Education manages three types of loan programs: The Perkins Loans, the Federal Family Education Loan (FFEL) Program, and the William D. Ford Federal Direct Loan (Direct Loan) Program.

The most common type of Department of Education student loan is the Perkins Loan. Students must be enrolled in a participating academic institution and demonstrate financial need in order to obtain qualify for this assistance. The loan is eventually repaid to the student’s school.

The FFEL and Federal Direct Loan programs involve two different types of assistance. The Stafford Loan is offered directly to students, while the PLUS Loans are for parents and graduate or professional degree students. Starting on July 1, 2010, only the U.S. Department of Education offers FFEL loans. They will not be available from private institutions.

To qualify for a Stafford Loan either under the FFEL or Direct Loan program, a student must be enrolled at least half-time as an undergraduate, graduate or professional degree student. Those students that demonstrate financial need qualify for a subsidized loan in which the Department of Education pays the interest on the loan for a specific time period. Unsubsidized Stafford Loans are available to students without having to demonstrate financial need, but the student must pay all interest that accrues on the loan.

PLUS Loans from both the FFEL and Direct Loan programs are available to help pay the educational expenses of dependent children. Graduate and professional degree students are also qualified to obtain PLUS loans directly for their education.

Another type of loan offered through the FFEL and Direct programs is the consolidation loan, which is available to both students and parents. The consolidation loan combines the borrower’s existing federal education loans into one loan that is paid with a single monthly payment.

The new law, known as the Health Care and Education Reconciliation Act, make applying easier for students and parents than the old process in which one was required to find a private lender. Now students and parents apply directly for U.S. Department of Education loans that are do not involve any commercial lending partners. Freshmen students can apply directly at the federal website rather than having to select a bank from a list of private lenders. The law also makes it easier for families to obtain Pell grants.