The federal government guarantees three types of loans:

Perkins loans go to undergraduate and students with "exceptional financial need." The interest rate is fixed at 5 percent. The government pays interest while the student is in school. The student must begin paying interest and principal when he or she leaves school. It’s easier to cancel a Perkins loan than other types of loans.

Stafford loans go to students. All new Stafford loans have a 6.8 percent fixed rate of interest. Lower-income students might qualify for a subsidized Stafford loan, on which the government pays interest while the student is still in school. Any student, regardless of income, can obtain an unsubsidized Stafford loan. Interest is added to the loan while the student is in school, but students do not have to begin paying off either subsidized or unsubsidized Stafford loans until they are out of school.

PLUS loans are for parents. The interest rate is also fixed at 7.9 percent for PLUS loans made directly by the government. Banks and other private-sector lenders can charge up to 8.5 percent fixed for PLUS loans but many will negotiate down to an effective rate of 7.9 percent.

Grad-PLUS loans are for graduate students and generally have the same interest rates as parent PLUS loans.

See http://www.finaid.org/loans/studentloan.phtml for information on student loans and http://www.finaid.org/loans/parentloan.phtml for information on parent loans.