Federal loans are the most accessible and affordable loan resources now available to students. There are two federal programs available nationally, the Stafford and Perkins programs. Both provide interest-subsidized, payment-deferred loans that borrowers can repay after their enrollment ends. Interest – capped at 8.25 percent for Stafford and 5 percent for Perkins – begins to accrue only after the borrower begins to repay the loan. To qualify for interest-subsidized Stafford or Perkins student loans, the student must demonstrate need by completing the FAFSA. Although several different repayment plans are available, most students repay these funds over a 10-year period.

Although students may borrow as much as $4,000 in Perkins funds each year, actual offers differ from institution to institution, based on availability and school policy. Stafford borrowers may borrow $2,625 in the first year, $3,500 in the second year and $5,500 in the third and fourth years. Additional Stafford and Perkins loans, with higher annual borrowing limits, are available to graduate and professional students.

Perkins and Stafford are the loans most often included in student aid awards. For students who demonstrate need, interest payments are deferred until the student is no longer enrolled at least half-time.

Perkins loan funds include both federal and institutional funds and reside on campus. If you are offered a Perkins loan, you need only to sign the promissory note.

Stafford loans are slightly more complicated. You must complete a specific loan application and submit it to the lender. Banks or state lending agencies generally provide Stafford loan funds. If the school offering you the loan is a Direct Loan school (about 25 percent are), funds will come directly from the institution.

Students who are unable to demonstrate need through the FAFSA may still borrow from the Stafford student loan program. These funds are, however, unsubsidized and require that the borrower be responsible for interest from the point funds are disbursed. This can be paid while the borrower is in school or capitalized and paid at the time principal payments become due.

Because of the interest subsidy we mentioned, you should first consider federal loans. At the same time, be on the lookout for local and institutional loans, which can sometimes offer even better terms than federal programs. As with local scholarships, check with fraternal organizations and churches or synagogues. Finally, an increasing number of colleges and universities are offering institutional loans at very reasonable rates.

Regardless of who you borrow from, federal loan repayment schedules are amortized over time, with a maximum standard repayment period of 10 years (under some circumstances, other repayment periods are available). The repayment period is increasingly important. If you make your payments on a timely basis, you can reduce the interest rate you are charged - sometimes substantially. The message here is: Pay on time and you can save money. If you have problems, contact your lender, who can offer you a variety of repayment options, even if you do have difficulties.