Student Loan Law and Legal Definition

Most student loan issues are covered by federal law. The U.S. Department of Education provides billions of dollars, about 70 percent of all student aid, to help millions of students and families pay for postsecondary education. A student loan is borrowed money you must repay with interest. You can be an undergraduate or graduate student. Parents may also borrow to pay the education expenses of their dependent undergraduate students. Maximum loan amounts depend on your grade level in school.

Federal Perkins Loans are offered by participating schools to students who demonstrate the greatest financial need. Any Federal Pell Grant eligibility must be calculated before a Federal Perkins Loan can be awarded. You repay the loan to your school.

Stafford Loans are made to students and PLUS loans are made to parents through two loan programs:

  • William D. Ford Federal Direct Loan (Direct Loan) Program: Eligible students and parents borrow directly from the federal government at participating schools. Direct Loans consist of Direct Stafford Loans, Direct PLUS Loans, and Direct Consolidation Loans. You repay these loans to us (the U.S. Department of Education).
  • Federal Family Education Loan (FFEL) Program: Private lenders provide federally guaranteed funds. FFELs consist of Federal Stafford Loans, Federal PLUS Loans, and Federal Consolidation Loans. You repay these loans to the bank or other private lender that made you the loan.

Some of the U.S. Department of Education's eligibility requirements for a student loan include the following:

  • The student must be a U.S. citizen or eligible noncitizen with a valid Social Security Number.
  • The student must demonstrate qualification to obtain a postsecondary education by:
  • Having a high school diploma or a General Education Development (GED) Certificate.
  • Passing an approved ability-to-benefit (ATB) test.
  • Meeting other standards your state establishes that we have approved.
  • Completing a high school education in a home school setting approved under state law.
  • The student must enroll in an eligible program as a regular student seeking a degree or certificate.
  • The student must register (or have registered) with the Selective Service if he is a male between 18 and 25.

U.S. Department of Education student aid is the largest but not the only source of financial aid. There are other sources of federal aid and about scholarships. Nonfederal financial assistance programs and requirements often vary from school to school, so check with the schools you're interested in for information about state and institutional aid.