This summer, Congress revamped the popular program that provides low-cost, government-guaranteed loans to students and parents. Instead of charging a variable rate that changes once a year, all loans disbursed July 1 or later will carry a fixed rate.

Stafford loans are always cheaper than Plus loans, so most families have their students max out their Stafford loans first. Annual Stafford loan limits for dependent students range from $2,625 for freshmen to $5,500 for juniors and seniors. Independent students can borrow more.

Students don't have to start repaying Stafford loans until they are out of school. If they have a subsidized loan, the government will pay their interest while they are in school. If they have an unsubsidized loan, the interest will accrue and be added to the loan while they are in school.

The next-cheapest source of funds is usually a Plus loan. If you own a home, you might find a fixed-rate home-equity loan at a comparable rate. But most experts prefer Plus loans because they don't require collateral and can be forgiven if the borrower dies or becomes permanently disabled, or if the student dies.

Each school offers Stafford and Plus loans directly from the government (called direct loans) or from commercial lenders under the Federal Family Education Loan Program. Some schools offer direct Stafford loans and Plus loans from banks.

If your school is a direct-loan school, your choice is simple: You can only get a direct loan. The direct program will reduce its rate on Stafford and Plus loans by one-quarter percentage point if you set up direct payments from your bank.

to make the first 12 payments on time, this discount will be revoked and added to your loan balance. The program does not discount Plus-loan fees.

If your school offers bank loans, you can take a loan from any lender that participates in the federal family loan program. Most of these schools have a list of preferred lenders. You are not restricted to this list, but it's a good place to start.

Some schools recommend lenders with the cheapest rates. Others focus on lenders with the best customer service, says Mark Kantrowitz, publisher of Finaid.com.

Schools provide a list of rates and discounts offered by each preferred lender. You should double-check it because terms change frequently. And don't forget to read the fine print.

Many lenders offer discounts when the loan is being repaid, which for Stafford loans doesn't happen until the student leaves school. While the student is in school, the loan is accruing interest at the higher rate.

Many lenders offer a discount after three or four years of on-time payments. Add that to the in-school years and you're looking at up to eight years at the higher rate. In most cases, borrowers lose their discount if they're late even once.

One of the more aggressive lenders is My Rich Uncle. It cuts the rate on Stafford loans by 1 percentage point, and by 1.75 points on Plus loans as soon as repayment begins.

Some states, including Massachusetts and Connecticut, have education finance authorities that offer good deals to students from or going to school in their states, says Kalman Chany, president of Campus Consultants and author of "Paying for College without Going Broke."

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