There are different kinds of federal student loans from different institutions. Hence, it is advisable to take the guidance of parents or other financial aiding sources to decide on the type of federal direct student loan that suits the student the best.
Perkins loan option:
This loan is available for undergraduates and graduates in need at a fixed lower interest rate of five percent for a repayment period of ten years. The loan limits for undergraduates are $5,500 per year and $27,500 per lifetime. For graduate students the limit is $8,000 per year and $60,000 per lifetime (including undergraduate loans). The funds are handled directly by the school, making it easier to get the amount as soon as the student enrolls.
Stafford loan option:
This is the most common federal student loan and anyone can apply for it. It offers fixed interest rates and is available in the subsidized and unsubsidized form. When making use of the subsidized federal student loan, the government pays the interest while the student is enrolled. In the case of unsubsidized federal student loan, the student has to the pay the interest but can wait with payments until he completes his or her graduation. The interest rate for unsubsidized loans is currently at 6.8 %. Students applying for a Stafford Loan must complete the FAFSA (free application for federal student aid). Stafford Loans are available directly from the United States Department of Education through the Federal Direct Student Loan Program (FDSLP). It is important to apply much earlier than the closing date for the application to avoid any last minute trouble.
PLUS loan option:
Also known as parent loan for undergraduate students. It is given to the parents of undergraduate students who are dependent and have enrolled at least half-time. This loan option requires the applicant to be free from any adverse credit experiences like bankruptcy, default etc on their credit record. These loans are offered at a fixed interest rate that is higher than the Stafford loan rate and repayment starts while the student is enrolled.
For more information on student loans check out my post about Student Loan Consolidation.