US Colleges

Student Loans

Student Loans

Student loans are loans offered to students pursuing a postsecondary education and must be repaid. The federal government usually issues student loans at a lower interest rate than private loans. Students may finance their education through private lenders; however, the interest rate is much higher and you may not be able to defer payments until after you finish college.

Federal Perkins Loan

This is a low interest, long-term loan made to the student based on financial need. The student must be enrolled and attending full time and the maximum loan amount is $4,000 (undergraduate) or $6,000 (graduate) per year.

Federal Stafford Loan

This loan is also made to the student, and the student must be enrolled and attending at least half time. There are two types of Stafford loans:

  • Subsidized – If you meet the need-based requirements, you may be eligible for a subsidized Stafford loan. This means that as long as you are enrolled and attending half time or more, you will not be responsible for the interest while in school and the principle is deferred.
  • Unsubsidized – If you do not show a financial need for the loan, you can receive an unsubsidized Stafford loan for which you are responsible for paying the interest, but the principle is deferred. You may choose to defer the interest as well, but you will ultimately be responsible for paying it.

Federal Parent PLUS Loan

This loan is available to the parents of dependent students who are enrolled and attending at least half time. The parent does not have to demonstrate a financial need. Like the unsubsidized Stafford loan, the parent will be responsible for paying the interest throughout the life of the loan. A parent may borrow up to the total cost of school less any other financial aid received.

Federal Graduate PLUS Loan

This loan is just like the Parent PLUS loan except that it is in the student’s name.

Private/Alternative Loan

After federal student aid options have been exhausted, a student may want to contact a private lender. A private lender is not associated with the federal government or any educational institution. Approval of this time of loan is not guaranteed, and the interest rate, which could be variable, is based on credit.

How to Find Loans for College

By now you have probably filled out the FAFSA (Free Application for Federal Student Aid) and learned that you are not eligible to receive grant money for college. You know that you have to get a loan but just aren’t sure where to begin your search. It all seems so complicated—interest rates, repayment options, deferments, subsidized or unsubsidized. You feel like you need a college education just to understand the terminology. Try to relax—if you made it through the FAFSA, you’ll be able to get through the loan application process.

Federal Loans

First, you should check with your financial aid office to see if you qualify for any federal loans. These loans usually have lower interest rates, longer grace periods, and various deferment options.

Private Loans

If you don’t qualify for a federal loan, you will need to research private loans. Remember that you should use this option only as a last resort because these interest rates will probably be higher than those associated with federal loans. Beware of high fees charged by some private lenders. A low-interest loan with high fees may cost you more than a higher-interest loan with no fees. Also, some lenders will give a lower rate while the student is in school and then put a higher rate into place when the repayment begins.

Student Loan Comparison Websites

While there are many helpful student loan comparison websites that are free to use, keep in mind that many of these sites do accept payment for placing lenders in their listings. The lists you get from these sites may not include cheaper loans simply because the lender does not pay the site for placement in their listings. A good student loan comparison site should meet the following:

  • The site should clearly recommend that borrowers first rely on federal aid before taking out a private loan.
  • There should be no fee to use the site.
  • The site should take great care not make too many credit inquiries, which can negatively impact the borrower’s credit score.
  • The site should give borrower’s specific interest rates and fees, not the lender’s best advertised rates.
  • The results of the search should be sorted by the total cost of the loan and should present the loan that serves the borrower’s best interest first.
  • The site should provide all contact information for the lender, such as web site and phone number, so that the borrower can contact the lender and apply for the loan.

How Do You Apply for Student Loans?

FAFSA

Every student should start by filling out the FAFSA (Free Application for Federal Student Aid), which not only determines your eligibility for federal grants but loans as well. Once you complete the form online, your SAR (Student Aid Report) will be sent to you. The EFC (Expected Family Contribution) section of this report is what your financial aid office will use to determine your eligibility for a federal loan.

Financial Aid Office

If you qualify for this type of federal financial aid, your school will prepare a financial aid package based on the amount of money you need. They will determine this need by subtracting your EFC from the total cost of attendance.

Private Lender

If you do not qualify for federal aid, you will need to contact a private lender. Your financial aid office may be able to recommend a lender; however, it is always a best practice to do your own homework. Research all lenders for the best possible interest rate and compare the loans. There are many free online resources that can also help you find and compare loans.

Before you accept any loan, keep in mind that you should only borrow what you need because you will have to repay the loan with added interest. Don’t forget to resubmit your FAFSA each year to determine if your eligibility for federal aid has changed.

When Do Graduates Repay Loans?

You’ve graduated at last. Hopefully, you have a job ready and waiting for you or are very close to securing employment. As you’re admiring that crisp diploma, it hits you—I have to begin repaying all of those student loans. How does that work exactly? Do you get home from the graduation ceremony still dressed in your cap and gown to find loan sharks waiting at your door or a bill in the mailbox? Fortunately for you and all other recent graduates who filed away the student loan paperwork and ignored it, some loans offer a grace period.

Federal Perkins Loan

The Federal Perkins Loan offers a nine-month grace period before you must begin making payments. If you choose to go back to school during this nine-month period, make sure that you enroll with at least a half time status and request a deferment. This will ensure that you can receive the nine-month grace period again in the future. Anytime you file for a deferment with a Federal Perkins Loan, regardless of type (economic hardship, student, etc.), you will be given a six-month grace period after the deferment time has expired.

Federal Stafford Loan

With a six-month grace period, the Federal Stafford Loan provides a shorter grace period than the Federal Perkins Loan. Unlike the Federal Perkins Loan, you are not given another grace period after deferment, no matter what type of deferment you requested. Also, if you allow your grace period to expire without re-enrolling in school, you will not be able to receive another six-month grace period in the future.

Other Loans

The repayment terms and conditions will vary for other loans. To find out the duration of the grace period on any loan, start with the loan promissory note, which should have details regarding the grace period your loan. If you do not have your promissory note, contact your lender. If you’ve forgotten who your lender is, use the following information to locate your loans.

  • The National Student Loan Data System (NSLDS)
    • The NSLDS is a central database of student aid for the U.S. Department of Education.
    • Call 1-800-4FEDAID (1-800-433-3243) and select option 3 “Borrower Loan Tracking Division”.
    • Go to www.nslds.ed.gov and click on “Financial Aid Review”.
  • The National Student Clearinghouse (NSC)
    • The NSC is a non-profit organization that serves as a single point of contact for checking a student’s status.
    • Go to www.nslc.org and click on “Students”. The “LoanLocator” is on this page.
  • Financial Aid Office
    • Contact your school’s financial aid office to locate your loan information.
  • Credit Bureau Reports
    • Although there is a charge for this service, you can locate your lender by obtaining your credit information from any of these credit bureaus:
    • Equifax
      1-800-658-1111
      www.equifax.com
    • Experian
      1-888-397-3742
      www.experian.com
    • TransUnion
      1-800-916-8800
      www.transunion.com