This topic can be very overwhelming.  For those of you who want to dig into the system, find out how it works and understand what all the options are, the information is provided in these pages.  If it becomes too overwhelming and you feel the need for guidance, using tools such as ESP Wizard and EFC Calculators can streamline the process. The bulk of Financial Aid comes in the form of federally government-backed loan programs, which disperse funds through companies such as Sallie Mae.  US Federal Government Loans

1. Stafford Loans – Stafford Loans are funded by either one of two very similar programs.

A. Federal Family Education Loan Program (FFELP)
Loans are provided by private lenders such as banks and credit unions, with the federal government guaranteeing the loans against default.

B. Federal Direct Loan Program (FDLP)
Loans are provided through Direct Lending Schools, and are provided directly to students and their parents by the federal government.
Here is how Stafford Loans work.  Financial need, as per the FAFSA application, will determine whether the loan is Subsidized (interest paid for by the federal government) or Unsubsidized (Interest is paid by the borrower during the time they are enrolled; or you can have the interest capitalized, or added to your principle amount).
* Loans are based on Financial Need.
* Loans are disbursed by the school to the student in two installments.
* Starting on July 1, 2007, Stafford Loans allow dependent undergraduates to borrow up to $3,500 their freshman year (up from $2,625), $4,500 their sophomore year (up from $3,500) and $5,500 for each remaining year.
* Independent students or students whose parents were unable to obtain a PLUS loan, may borrow an additional unsubsidized $4,000 the first two years and $5,000 the remaining years),
* Graduate students can borrow $20,500 per year (up from $18,500), although only $8,500 of that is subsidized.
* There are also cumulative limits of $23,000 for an undergraduate education and a $65,500 combined limit for undergraduate and graduate.
* (For independent students and for students whose parents were denied a PLUS loan the cumulative limits are $46,000 and $138,500, respectively.
* Some medical school students may be able to borrow up to $40,500 a year (up from $38,500) and $189,125 total.)
* The amounts that can be borrowed will be determined after subtracting Pell Grants and other aid from the Cost of Attendance (COA).
* There is a 6-month grace period upon the following: graduation, withdrawing from school, or the student's course load drops below half-time status.

2. PLUS Loans (Parent Loans)
PLUS Loans are loans taken out by parents to assist in their child's education related expenses.  The interest rates are typically not as low as Stafford Loans.  They are funded through FFELP and FDLP as well, however through a separate application process. 
Here is how it works:
* Parents complete a PLUS Loan application, available at the school's financial aid office.
* The acceptance of the PLUS Loan is predicated on parents' credit history.
* The maximum amount that can be borrowed is determined by taking the Cost of Attendance minus other financial aid that the student receives.
* The loans are disbursed directly to the school in two installments, who then requires the student's parents to sign and return the checks, at which time funds are applied towards the education related expenses.
* Loan Origination Fees of up to 4% are charged on the amount borrowed and are deducted from the disbursed amount.
* There is no grace period associated with PLUS Loans.
* Parents are responsible for making principle and interest payments on the loans while their child is attending school.
* The first payment is due 60 days after disbursement of the loan for the given school year.
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