The reason this was called the Guaranteed Student Loan Program in the past is because the loans are insured by the guarantee agency in each state and reinsured by the federal government. This program is now the major source of credit for educational loans.

Because the loans are subsidized by the government, the interest rate is lower than most commercially available loans. For the first four years of repayment the interest rate is 8 percent, and 10 percent thereafter. There is also an "origination fee" of 5 percent, which helps the government reduce its cast of subsidizing the loan. Repayment of both principal and interest are deferred until six months after graduation or the student leaves school. The loan must be paid within 5 to 10 years.

If you're a dependent undergraduate student you can borrow up to $2,625 if you're a first-year student enrolled in a program of study that is at least a full academic year. $3,500 if you've completed your first year of study and the remainder of your program is at least a full academic year. $5,500 a year if you've completed two years of study and the remainder of your program is at least a full academic year.

If you're an independent undergraduate student or a dependent student whose parents are unable to get a PLUS Loan, you can borrow up to $6,625 if you're a first-year student enrolled in a program of study that is at least a full academic year (only $2,625 of this amount may be in subsidized loans). $7,500 if you've completed your first year of study and the remainder of your program is at least a full academic year (only $3,500 of this amount may be in subsidized loans). $10,500 a year if you've completed two years of study and the remainder of your program is at least a full academic year (only $5,500 of this amount may be in subsidized loans).