College Student Loan News and Info

What is a subsidized/unsubsidized Loan?  Stafford loans come in two types: subsidized and unsubsidized. Interest accrued on subsidized loans during school is paid by the government. Borrowers have up to 10 years to repay their subsidized federal Stafford loan.

Unsubsidized loans start charging interest from the moment the financial aid (money) is given to the student. Sometimes, the lender offers the borrower the option to make “interest-only” payments over the course of his or her time in school. Unsubsidized Stafford loans can be used to supplement subsidized Stafford loans. 

Borrowers have up to 10 years to repay their unsubsidized federal Stafford loans. However, they must pay interest while they are in school, unless they make arrangements to postpone or capitalize them (add them to the principal) at the start of the repayment period.

Who qualifies for a Stafford loan?  To be eligible for a Stafford loan, subsidized or non-subsidized, you must: 

1. Be enrolled as a full or half-time undergraduate, graduate or professional student;
2. Be a U.S. citizen or eligible resident non-citizen;
3. Meet financial need criteria as defined by the federal government;
4. Sign an application and promissory note.

Federal Perkins loans are low-interest government-funded loans made available through schools to very needy students. No interest is charged on Federal Perkins Loans while a student is enrolled in a post-secondary school at least half-time. Students must begin repaying the loan nine months after they graduate, or after their enrollment drops to less than half time. 

If a family prefers, parents can take on a loan for their undergraduate child’s education in their name. Through the Parent Loan for Undergraduate Students (PLUS) program, financial institutions lend money to parents to cover the education expenses of a dependent.

Generally, PLUS funds are limited to the amount needed to cover education expenses less the contributions of other financial aid. Depending on the lender, payment of PLUS loans begins after the final disbursement. Borrowers have up to 10 years to repay. 

To qualify for a PLUS loan, you must:

1. Be a parent of a dependent, undergraduate student who is enrolled full or half time
2. Be a U.S. citizen or eligible resident non-citizen
3. Have a satisfactory credit history 

If a student or his or her parents do not qualify for federally funded loans, or if they simply require more money to meet the financial requirements of post-secondary education, there are other options.

Private loans, which come from private institutions such as banks and credit unions, are not guaranteed by the government. Their rate of interest, along with their terms and conditions, are set by the lender. In some cases, lenders will not require any payments while the student is in school and may even offer flexible repayment options after graduation. However, private loans’ specifics vary widely, so students should shop around. 

Students and parents can also investigate other borrowing sources to cover the cost of education. One option is a home equity loan. The interest on these loans is also usually tax deductible.

Many states offer financial aid to students attending college in their state. Contact your state higher education agency for more information.

This entry was posted on Sunday, February 17th, 2008 at 1:38 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.