Folks at my Idaho Countdown workshop wanted more information about federal financial aid than we had time to discuss.  So here is  a more detailed look at what’s out there from Uncle Sam.

First, you should know that many private schools won’t accept federal funds of any kind, including grants and loans awarded to students.  Their reasoning is that with federal funds comes federal regulation of school policies and curriculum.  Their fears are increasingly likely to be realized as the Obama administration begins to tie college funding to service in federally-run community service organizations like AmeriCorps – a move that will also negatively impact private charity as true volunteers are replaced by paid government workers on the AmeriCorps payroll.  So as you put together your college funding basket, be sure to check with the colleges you want to attend to see whether they accept federal funds.

Federal funds can include both grants (gift money which does not have to be repaid) and loans (which do have to be repaid).  Most of these are need-based options. Let’s specifically look at federal loans, because these are the instruments which could get you in the most hot water.

Stafford Loans

These are the most common federal loans, and they come in two flavors:

• Subsidized Stafford Loans: need-based, no interest accrues while the student in enrolled at least half-time in college. Well actually, the government pays the interest until the student leaves college.
• Unsubsidized Stafford Loans: not need-based, low interest accrues while the student is in college, but payment can be deferred until after the student is no longer enrolled half time.

Perkins Loans

The money for theses loans comes jointly from the college and from the feds.  The government gives a lump sum to targeted schools for the college to administer as it sees fit.  They accrue no interest during college and repayment begins after the student leaves college.  Eligibility for these loans includes a provision that young men register with Selective Service. Perkins loans are available to graduate students as well as undergrads at 5% interest.

Parent PLUS Loans

Parents who are trying to finance a dependent child’s college costs may be eligible for these 8.5% loans regardless of financial “need”.  A credit check is required, and several repayment plans apply.  Some allow payments to be deferred until after the student leaves college, but interest accrues from the time the loan is given.

You can see all these loans compared in a very helpful chart at SallieMae College Answer.  Better yet, discover how to get private scholarships that won’t leave you burdened with debt and will be welcomed by every college.  Check out Countdown to College: the Homeschoolers’ Guide to Winning Scholarships and its companion, Countdown to College e-Forms Disk, which includes a newly updated list of dozens of links to scholarship search engines and websites.