Posted on | May 15, 2012
The Federal government has recognized the needs of its citizens to education, regardless of financial capacity. As such, congress has made federal student loans available. This article will discuss two types of federal student loans.
Federal Perkins Loan
A Perkins loan is a need based federally subsidized and university aided student loan. Need based means that a genuine financial need or hardship has to be shown in order for approval to be granted. This means the interest rates are lower and the loan terms are more favorable to the student, or at least it is more flexible.
Federal Stafford Loans
Stafford loan is discussed in title IV Federal debt. This type of federal student loan is more common and easier to qualify for because there is no need to show actual financial need or hardship. This loan is also subsidized by the government. However terms of payment and interest rates are higher.
Before discussing the difference of both types of loans it is important to discuss briefly the similarities of both. The basic similarities are as follows:
- Both require the payment of interest
- Both are payable a few months after completion of the studies
- Both must be used for undergraduate and graduate studies
Perkins vs. Stafford: Income
As a general rule low income earners qualify for a Perkins loan and a Stafford loan. This is because the former can be applied for only after the showing of actual financial need or hardship and the latter can be applied for to augment the former. However higher income earners may no longer qualify for a Perkins loan because they may have actual financial capacity to pay.
Perkins vs. Stafford: Half Time Student
As a general rule a half time student is one who is enrolled in at least 6 to 8 units/hours in a given semester. However it is best to consult with the school administration to be sure. A Perkins loan does not require the student applicant to be at least a half time student, however a Stafford loan applicant needs to be at least a half time student in order to qualify.
Perkins vs. Stafford: Award Amounts
The amount awarded to a Stafford loan grantee depends on the grade level and status of dependency (again financial need is not a factor).The amount awarded to a Perkins loan grantee depends on the following rules:
- Undergraduate: Maximum loanable amount per year is $4,000 and total maximum loanable amount is $20,000.
- Graduate: Maximum loanable amount per year is $6,000 and total maximum loanable amount is $40,000.
Perkins vs. Stafford: Interest Rate
The interest rate for a Perkins loan is 5% fixed. However for Stafford loans the interest rate changes, usually every annum. It is important to note that steps are being taken by the federal government to convert the interest rate of Stafford loans to a fixed rate as well.
Perkins vs. Stafford: Lender and Repayment
The lender is the school or university in case of Perkins loans therefore repayment must be made to the school or its agents. Repayment can last up to 10 years. The lender is any other lending institution in a Stafford loan and repayment can last 10 to 30 years.