The Federal Family Education Loan Program, the largest federal student-aid programs offers three types of loans: Federal Stafford loans, Federal PLUS loans and Federal Consolidation loans.

Federal Stafford Loans

Eligibility
You may qualify for a Stafford loan if you:

• Are a U.S. citizen or eligible noncitizen.
• Have a high-school diploma or its equivalent, or you have been determined to have the ability to benefit.
• Plan to enroll at least half-time in a postsecondary institution that participates in the FFELP.

Subsidized and Unsubsidized Stafford Loans

There are two types of Stafford loans:

Subsidized loans are available to students who meet certain financial-need criteria. If you qualify for this type of loan, the federal government will pay the interest on the loan while you are in school, during a six-month grace period after you leave school, and during periods when you are authorized to defer your loan payments.

Unsubsidized loans are available to students regardless of their financial need. You are responsible for the interest that accumulates on an unsubsidized loan while you attend school, during the grace period and during any periods when you are authorized to defer your loan payments. You have the option to pay the interest during these periods or postpone payment. If you postpone payment, the interest will be added to your principal balance. This addition of interest to your principal balance is known as capitalization.

Interest Rates and Fees
Interest rates on subsidized Stafford loans to undergraduate students will be reduced in annual steps to 3.4 percent by July 1, 2011. Interest rates on all other Stafford loans issued since July 1, 2006 are fixed at 6.8 percent. For loans disbursed prior to July 1, 2006, interest rates on Stafford loans are variable and are adjusted annually on July 1, based on the prevailing rate of the 91-day Treasury bill. Stafford-loan rates are capped, however, at 8.25 percent.

Stafford-loan borrowers may be charged fees. Beginning July 1, 2008, these fees can total no more than 2 percent of the loan amount. These fees are deducted from the loan proceeds and are used to cover the costs of loan defaults and other administrative costs of the FFELP.

In partnership with USA Funds^®, SMS Hawaii^® pays the 1 percent federal default fee on the borrower's behalf for Stafford loans issued by SMS Hawaii lender-partners. Read more about SMS Hawaii's reduced fee Stafford loans.

Loan Limits
Federal law specifies annual loan limits on Stafford loans based on your year in college and your dependency status. If you are a dependent undergraduate student, you can borrow up to the following amounts each year for loans disbursed on or after July 1, 2008:

• $5,500 if you are a first-year student enrolled in a program of study that is at least a full academic year. (Up to $3,500 may be in subsidized loans.)
• $6,500 if you are a second-year student enrolled in a program of study that is at least a full academic year. (Up to $4,500 may be in subsidized loans)
• $7,500 if you are enrolled in your third or subsequent year of a program of study that is at least a full academic year. (Up to $5,500 may be in subsidized loans.)

If you are an independent undergraduate student or a dependent student whose parents are unable to obtain a Federal PLUS loan, you may be able to borrow up to the following amounts each year:

• $9,500 if you are a first-year student enrolled in a program of study that is at least a full academic year. (Up to $3,500 may be in subsidized loans.)
• $10,500 if you are a second-year student enrolled in a program of study that is at least a full academic year. (Up to $4,500 may be in subsidized loans.)
• $12,500 if you are enrolled in your third or subsequent year of a program of study that is at least a full academic year. (Up to $5,500 may be in subsidized loans.)

If you are a graduate or professional student, you may borrow up to the following amounts each year:

• $20,500. (Up to $8,500 may be in subsidized loans. Higher limits may apply to students pursuing certain health professions.)

In addition to annual loan limits, the total amount of all Federal Stafford loans that you take out for all years of enrollment may not exceed the following aggregate limits:

• $31,000 for dependent undergraduate students.
• $57,500 for independent undergraduate students.
• $138,500 for graduate or professional students. 
• $224,000 for graduate or professional students enrolled in approved health professions programs. 

These amounts include any balance of a Federal Stafford loan that is included in a Federal Consolidation loan.

Grace Period
Federal Stafford loans provide a grace period of six months after you leave school or drop below half-time enrollment before you must begin repaying your loans.

Federal PLUS Loans

Eligibility
You may qualify to take out a PLUS loan if:

• You are the parent of a dependent undergraduate student.
• You are a graduate or professional student, and your PLUS loan was certified by your school on or after July 1, 2006.
• You, or the dependent undergraduate student for whom you are taking out a PLUS loan, are enrolled at least half-time at a postsecondary institution that participates in the FFELP.
• You — and in the case of a PLUS loan taken out by a parent, your parent — are U.S. citizens or eligible noncitizens.
• To qualify to borrow a PLUS loan, a parent must be the student’s birth parent, adoptive parent or stepparent, if the stepparent’s income and assets were taken into account when calculating the student’s Expected Family Contribution.
• The parent applying for the loan is responsible for repaying the loan.
• Parents may take out a PLUS loan for more than one dependent student at a time, although a separate application is required for each student.
• PLUS loans are available without regard to financial need.
• The lender that issues a PLUS loan is required to verify that the borrower does not have an adverse-credit history.

Interest Rates and Fees
Effective for PLUS loans disbursed on or after July 1, 2006, interest rates are fixed at 8.5 percent for PLUS loans. For loans disbursed prior to July 1, 2006, interest rates on PLUS loans are variable and are adjusted annually on July 1, based on the prevailing rate of Treasury bills. PLUS-loan rates are capped, however, at 9 percent.

PLUS-loan borrowers may be charged fees of up to 4 percent of the loan amount. These fees are deducted from the loan proceeds and are used to cover the costs of loan defaults and other administrative costs of the FFELP.

In partnership with USA Funds, SMS Hawaii will pay on behalf of PLUS-loan borrowers the 1-percent federal default fee. Learn more about SMS Hawaii's PLUS-loan benefits.

Loan Limits
Parents and graduate and professional students may borrow up to the student’s full cost of attendance, less any other financial aid.

Grace Period
Parents may defer principal payments on their PLUS loans for up to six months after the student for whose benefit the loan was issued drops to less than half-time enrollment. PLUS loans to graduate and professional students offer no grace period; loan repayment begins after the loans are fully disbursed, unless the student qualifies for a deferment, such as for being enrolled at least half time.