A Silver Lining: Federal Loans Still Available

With all the downbeat news on the credit markets, WSJ (Wall Street Journal) story makes a good point that federal student loans, which constituted 78% of student loans for the 2007-08 school year, are still widely available and even growing as more students apply for them.  The article cites statistics from the Department of Education that as of the end of November 2008, federal student loans had increased by 18.6% as compared to the year earlier. 

The federal government has taken dramatic actions throughout 2008 to ensure availability of these federal loans, which can come directly through the federal government if your school is a Direct Lending institution or through student lending companies if your school is a FFEL instituion. 

Background:  Federal loans referred to in this article are:

• Stafford loans
  
  • Undergraduates have Stafford loan limits of $5,500 to $7,500 depending on year in school
    • Interest rates for these loans for the 2009-10 school year will be 5.6% for subsidized loans or 6.8% for unsubsidized loans. 
  • Graduates have Stafford loan limits of $20,500 with the same interest rates

• PLUS loans (click here for a fuller description of Parent Plus Loan)
  
  • Parent PLUS loans as their name suggests are for Parent's and cover up to the full cost of attendance for their child's education.
    • If your child attends a Direct Lending (DL) institution, interest rates on Parent PLUS loans are fixed at 7.9% vs. 8.5% at FFELP institutions
      • Visiting the school's financial aid website will provide the answer as to whether or not the school is a DL or FFELP institution
  • Graduate PLUS loans are for graduate students and also cover up to the full cost of attendance.  
    • If you attend a Direct Lending institution, interest rates on Parent PLUS loans are fixed at 7.9% vs. 8.5% at FFELP institutions