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#Student Loans

#Federal Loans

Pros and Cons:

Federal student loans offer low, fixed interest rates. This makes them much more attractive than private loans from commercial lenders.

However, the availability of some Federal loans are based on need. You may not qualify

Apply for all federal loans using FAFSA

1. Direct Loans

U.S. Department of Education is your lender

Direct Subsidized Loans

Loans made to eligible undergraduate students who demonstrate financial need to help cover the costs of higher education at a college or career school.

Am I eligible?

You must be enrolled at least half-time at a school that participates in the Direct Loan Program. Generally, you must also be enrolled in a program that leads to a degree or certificate awarded by the school.

Definition of Subsidized

The U.S. Department of Education pays the interest on a Direct Subsidized Loan:

  • while you’re in school at least half-time,
  • for the first six months after you leave school (referred to as a grace period), and
  • during a period of deferment (a postponement of loan payments).

Current Interest Rate:


Direct Unsubsidized Loans

Loans made to eligible undergraduate, graduate, and professional students. The student does not have to demonstrate financial need to be eligible for the loan.

Am I eligible?

You must be enrolled at least half-time at a school that participates in the Direct Loan Program. Generally, you must also be enrolled in a program that leads to a degree or certificate awarded by the school.

Definition of Unsubsidized

  • You are responsible for paying the interest on your loan during all periods.
  • If you choose not to pay the interest while you are in school and during grace periods and deferment or forbearance periods, your interest will accrue (accumulate) and be capitalized (that is, your interest will be added to the principal amount of your loan).

Current interest rate:

  • Undergrad: 4.66%
  • Grad or Professional: 6.21%

Direct PLUS Loans

Loans made to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other financial aid.

Am I eligible?

You must be a graduate or professional degree student enrolled at least half-time at an eligible school in a program leading to a degree or certificate, or be the parent of a dependent undergraduate student enrolled at least half-time at a participating school;

Also, you must not have an adverse credit score, although you can have someone with a good credit score endorse you

When do I begin repayment?

Your Direct PLUS Loan enters repayment once your loan is fully disbursed (paid out).

However, if you are a graduate or professional student, your loan will be placed into deferment while you are enrolled at least half-time and for an additional six months after you cease to be enrolled at least half-time.

Current interest rate:

For Direct PLUS Loans first disbursed on or after July 1, 2014, and before July 1, 2015, the interest rate is 7.21%.
These are fixed interest rates for the life of the loan.

Direct Consolidation Loans

A Direct Consolidation Loan allows you to consolidate (combine) multiple federal education loans into one loan. The result is a single monthly payment instead of multiple payments.

Consolidating your federal education loans can simplify your payments, but it also can result in loss of some benefits.

2. The Federal Perkins Loan Program

School-based loan program for undergraduates and graduate students with exceptional financial need.
You must demonstrate financial need

The school is your lender.

Details on Perkins Loan

Low-interest federal student loans for undergraduate and graduate students with exceptional financial need.

Am I eligible?

  • Available to undergraduate, graduate, and professional students with exceptional financial need. Meaning you must demonstrate financial need on your FAFSA
  • Not all schools participate in the Federal Perkins Loan Program. You should check with your school’s financial aid office to see if your school participates.

Interest rate:

Interest rate for this loan is 5%.

How much can I borrow?

If you are a graduate or professional student, you may be eligible to receive up to $8,000 per year. The total you can borrow as a graduate student is $60,000, which includes amounts borrowed as an undergraduate.

The amount you can borrow depends on your financial need, the amount of other aid you receive, and the availability of funds at your college or career school.

When do I begin repayment?

If you are attending school at least half-time, you have nine months after you graduate, leave school, or drop below half-time status before you must begin repayment.

If you are attending less than half-time, check with your college or career school to find out how long your grace period will be.

3. Federal Family Education Loan (FFEL) DEPRECATED

In the FFEL Program, private lenders made federally guaranteed student loans to parents and students. Commercial lenders (e.g. Sallie Mae) would use their private capital to finance loans under the FFELP but received subsidies from the federal government.[1]

These subsidies were used to maintain interest rates at the federally mandated levels, pay down fees associated with the loans and cover expenses associated with collection and defaults.[2]

The government also guaranteed a large portion of the loans, insuring private lenders against default. If a parent or student defaults, the private lender was reimbursed by the government for its losses.

Stafford loans are under FFEL and thus discontinued now

In contrast, under the Direct Loan program, the government lends directly to students using federal funds provided to it by the US Treasury.

Deprecated by Health Care and Education Reconciliation Act of 2010. This program is eliminated. All new federal student loans come directly from the U.S. Department of Education under the Direct Loan Program.

Stafford Loans DEPRECATED

  • available under FFEL
  • Subsidized and Unsubsidized versions
  • Most common type of federal loan.
  • Generally was available to any student
  • Interest rate ~6.8%

#Private Loans