College Student Loan News and Info

Students Loans are a type of financial aid YOU MUST REPAY, including the interest accumulated during the repayment period. Federal Loans have a low annual interest rate and favorable repayment terms, including an extended repayment period. They are available for students and parents and the eligibility for different student loans can be based on financial need or not.

Remember that you are responsible for the student loan debt even if you do not finish your studies or you are not able to find the job you were looking for. If you fail to monthly repay your student loan and you do not make an arrangement with the loan holder, you will go into default and you will in the future have many problems to obtain other types of loans.

The most popular loans are guaranteed by the Federal Government and regulated by the US Department of Education.

Student loans can be Federal or Direct Student Loans, depending on who is the loan provider.

Federal Family Education Loan Program (FFELP): these student and parent loans are provided by private lenders such as banks, credit unions, savings and loan associations; and are guaranteed by the Federal Government. The loan holders are the banks and financial institutions. You do have to qualify for this type of loan with a credit history. A co-signer might be the best way to go.

Federal Direct Student Loan Program (FDSLP): The student and parent loans are offered directly by the Federal Government through the schools. The loans are managed and collected by the US Department of Education.

Both programs, Federal and Direct Student Loans, offer the same types of loans. Receiving a loan under one of these programs normally depends on which of these programs the school you will attend participates in.

Federal Perkins Loan: Is a low-interest loan available for students with economic need and the lowest Expected Family Contribution. This loan is provided by Educational institutions or schools.

Perkins Loan is a federal subsidized loan. Students apply directly at their school or university. The interest rate is fixed at 5 % per year and government pays for it until the student gets a job. There is a nine-month grace period until you start repaying.

The student must repay to the school or university as this institution is actually lending a part of the funds, the rest being granted by the federal government.

Funds are directly transferred to the student by the educational institution via a check or money order. Funds are normally delivered to the student along the educational year, in two or more installments.

Federal Perkins Loan is not charged with any further fees or commission. You just need to pay interest and capital. When students do not pay their monthly installments in time or pay less than agreed, a fine or penalty will be applied. If they do this often, larger penalties may apply.

The monthly amount to repay is fixed at the time of granting, and it will depend on how much you are borrowing and how long a repayment period you are applying for. It will usually be an average 40 to 50 dollars per month. Interest rate will be normally 5 % on a ten-year repayment period. That is if you borrow between 4000 and 5000 dollars.

Federal Perkins loan repayment can be delayed and under certain circumstances they can be cancelled.

Long before students arrive on campus, freshmen at any given college or university already have their first homework assignment: Upon enrolling for their first fall term, students should study their cash flow situation.

Good financial planning for college is like a three-credit course for families. As part of that proverbial course, all students are encouraged to practice spending money and to finally learn to manage it. Students who do not handle their money well or begin to understand its management fall behind in college and have a hard time catching up later in life.

If you want to be financially stable when you leave college, you must be money savvy when you enter it. If you are a graduating high school senior, get ready for a crash course in money management the summer before you start college. Here are six steps to help you pass the test.

Build a First-Year Budget

Perhaps the single most important financial tool for college freshmen is a budget. Before you go to school, determine how much money you are going to need. Start with a list of your must-haves and nice-to-haves. Then start assigning dollar amounts to each of them.

If you are not sure how much things are going to cost, contact your school’s financial aid office. It will have well-researched numbers regarding how much it costs to live on campus, including the average price of housing, food, books and even entertainment.

Analyze Your Resources

What you have is equally important as what you need. Just like creating a budget for expenses, you should also create a budget for how much you have. Add up all your savings in savings, checking or investment accounts. Then estimate how many hours per week you can work during the school year and how much you will earn per hour. This will give you a good idea of what you will have to spend.

Do not forget your parents, either. Find out exactly how much money they are able and willing to give you per week, per month or per year.

Track Your Spending

If you want to develop good financial habits, start practicing them right away. Track your expenses while you are still at home. Keep track of what you spend to get a better idea of what you will need for eating out, getting around and personal items. Or if you’re not that great at tracking expenses, start with a set amount of cash and see how long you can make it last.

Get A Job
The easiest way to get money is to work for it. Be prepared to work between 10 and 20 hours per week while you are in school, and increase your hours significantly when you are not — starting now. Summer is a great time to load up on hours.

Live Modestly

Smart spending does not stop on the first day of school. It is a year-round endeavor. Be willing to live like a student. Go to the used bookstore to buy your books and to the used clothing store to buy your clothes. Learn to ride a bike or walk rather than feeling as if you need to have a car, which is a huge expense.

When it comes to financial aid, do the research and chose the best possible student loans for your financial situation. You will have to pay it back when you are done, so think as if you need to pay it back now. I guarantee you will get the best financial aid available to you.

The U.S. Department of Education administers the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Student Loan Program. Both the FFEL and Direct Student Loan programs consist of what are generally known as Stafford Loans for students and PLUS Loans for parents.

Schools generally participate in either the FFEL or Direct Student Loan Program but sometimes participate in both. Under the Direct Student Loan Program, the funds for your loan come directly from the federal government. Funds for your FFEL will come from a bank, credit union, or other lender that participates in the program. Eligibility rules and loan amounts are identical under both programs, but repayment plans differ somewhat.

To qualify for either type of loan, you must fill out a FAFSA. After your FAFSA is processed, your school will review the results and will inform you about your loan eligibility. You also will have to sign a promissory note, a binding legal document that lists the conditions under which you are borrowing and the terms under which you agree to repay your loan.

You will need to choose a lender if you obtain a FFEL Stafford Loan. However, if you have a Direct Stafford Loan, the federal government—through the U.S. Department of Education—is your lender. Schools that participate in the FFEL Program will usually have a list of preferred lenders. Student loan borrowers may choose a lender from that list, or choose a different lender they prefer. Here are a few things to think about when selecting a FFEL lender.

How much can I borrow? It depends on your year in school and whether you have a subsidized or unsubsidized Direct or FFEL Stafford Loan. A subsidized loan is awarded based on financial need. If you are eligible for a subsidized loan, the government will pay the interest on your loan while you are in school, for the first six months after you leave school, and if you qualify to have your payments deferred. Depending on your financial need, you may borrow subsidized money for an amount up to the annual loan-borrowing limit for your level of study.

You might be able to borrow loan funds beyond your subsidized loan amount even if you do not have demonstrated financial need. In that case, you would receive an unsubsidized loan. Your school will subtract the total amount of your other financial aid from your cost of attendance to determine whether you are eligible for an unsubsidized loan. Unlike a subsidized loan, you are responsible for the interest from the time the unsubsidized loan is disbursed until it is paid in full. You can choose to pay the interest or allow it to accrue and be capitalized. Capitalizing the interest will increase the amount you have to repay.

You can receive a subsidized loan and an unsubsidized loan for the same enrollment period as long as you do not exceed the annual loan limits.

If you are a dependent undergraduate student, each year you can borrow up to:

• $3,500 (as of the 2007-08 academic year) if you are a first-year student enrolled in a program of study that is at least a full academic year.
• $4,500 (as of the 2007-08 academic year) if you have completed your first year of study and the remainder of your program is at least a full academic year.
• $5,500 if you have completed two years of study and the remainder of your program is at least a full academic year.

If you are an independent undergraduate student or a dependent student whose parents have applied for but were unable to get a PLUS Loan, each year you can borrow up to:

• $7,500 (as of the 2007-08 academic year) if you are a first-year student enrolled in a program of study that is at least a full academic year. No more than $3,500 of this amount may be in subsidized loans.
• $8,500 (as of the 2007-08 academic year) if you have completed your first year of study and the remainder of your program is at least a full academic year. No more than $4,500 of this amount may be in subsidized loans.
• $10,500 (as of the 2007-08 academic year) if you have completed two years of study and the remainder of your program is at least a full academic year. No more than $5,500 of this amount may be in subsidized loans.

If you are a graduate or professional degree student, each year you can borrow up to:

• $20,500 as of the 2007-08 academic year. No more than $8,500 of this amount may be in subsidized loans.

When you graduate with a graduate or professional degree, the maximum total debt allowed from Stafford Loans is $138,500. No more than $65,500 of this amount may be in subsidized loans. This maximum total graduate debt limit includes Stafford Loans received for undergraduate study.

These amounts are the maximum yearly amounts you can borrow in both subsidized and unsubsidized FFELs or Direct Student Loans, individually or in combination. Because you cannot borrow more than your cost of attendance minus the amount of any Federal Pell Grant you are eligible for and minus any other financial aid you will get, you may receive less than the annual maximum amounts.

This page contains information about college partnerships, also known as articulation agreements. These are agreements between community colleges and four-year colleges to provide a smooth transition for transfer students from community college graduates into four-year colleges. Typically, they guarantee either that the associate’s degree will satisfy all freshman and sophomore general education requirements at the four-year university or specify a list of courses that will be treated as equivalent.

Some colleges offer dual admissions programs where the student applies to both the community college and the four-year college at the same time. If admitted, the student is guaranteed a spot as a transfer student at the four-year college provided that they obtain an associates degree from the community college. Won’t this be a huge time and stress saver? Knowing you have already been excepted two years down the road. That is planning for the future.

Some four-year colleges have such well-defined articulation agreements that the community colleges act as feeder schools for the four-year colleges, with a large percentage of transfer students coming from those schools.

There is pending legislation in the US Senate, S1677 Community College Partnership Act of 2003, which is intended to encourage such partnerships between community colleges and four-year colleges.

Students can save on tuition and there student loan bills by completing some of their credits at a lower-cost community college and then transferring to a four-year college or university. The average community college tuition rate is 40% of the average tuition rate at four-year public colleges and 10% of the average tuition rate at four-year private colleges. Even when one compares net tuition rates, one can still save thousands of dollars a year on there student loan bill by attending a community college for the first two years.

Most college partnerships are either limited to colleges within a specific geographic area or between all of the public community colleges and public four-year colleges in the state’s system of higher education. Depending on the state you live in or plan on going to college in, this can be a very large choice of schools to attend.

Two states, Florida and Pennsylvania, guarantee admission into the state’s public four-year colleges for students who complete an associate’s degree at one of the state’s community colleges.

The League for Innovation in the Community College has articulation agreements between the more than 600 League Alliance Member colleges and several four-year colleges, including Antioch University McGregor, Capella University, Franklin University, Strayer University, University of Phoenix, United States Open University, and Western Governors University.

Besides looking into articulation agreements, students should also ask about the college’s advanced standing policy (the ability to get credit for AP tests, CLEP and other exams). Obtaining credits for these will only decrease you time at school so you can get out there in the real world.

Looking into this type of program can only enhance your college experience as well as cute the cost of a student loan down significantly. So, once again, do your home work and check out all the options that are available to everyone. Eliminate the ones that will not work for you and check further into the ones that look right for you.

Sen. Edward Kennedy (D-MA), chairperson of the Senate’s education committee, introduced the “Strengthening Student Aid for All Act” yesterday to prevent potential disruptions in federal student financial aid loans caused by volatility in the marketplace. His counterpart in the House, Rep. George Miller (D-CA), also released similar legislation yesterday, but with a few differences. The bills, which would make significant changes to Federal Student Financial Aid programs, comes the same week that the 11th and 12th largest student loan originators suspended FFELP participation.

Senate Bill

Kennedy’s bill would:
• Add $750 to the maximum Pell Grant awards for students with negative expected family contributions
• Annually Increase federal student financial aid loan limits by $1,000 for dependent students and $2,000 for independent students on unsubsidized Stafford loans
• Allow parent PLUS borrowers to receive deferments for children enrolled in college
• Require the Department to designate guaranty agencies as “lenders of last resort” on a college-wide basis rather than on a student-by-student basis
• Allow the Department to serve as a secondary market of last resort to purchase FFELP loans from lenders that need additional capital to continue making loans

This bill addresses all of the key elements NASFAA has advocated for in its testimony and communications with the House and Senate Committees, and letters to the Department of Education, including safety nets for the loan programs and enhancements to the Federal Pell Grant Program.

Kennedy acknowledged that the credit market crisis has made it more difficult for lenders to raise capital to make federal student financial aid loans. Punctuating his point were the announcements by Student Loan Xpress and NorthStar that they would be halting their participation in the federal student financial aid loan programs. Kennedy’s bill seeks to decrease reliance on private student loans while shoring up the federal loan programs.

The best way to help students and families afford college is to increase grant aid. More aid up front means fewer loans and less debt on graduation day.

Increasing federal student financial aid loan limits will also help keep students from borrowing private loans. Parents who relied on other forms of financing - such as home equity lines - are now turning to PLUS loans. The bill would provide some relief for these parents. The bill would also relieve borrowers from the burden of proving their eligibility for LLR loans.

This bill comes at the right time for the right students. This is a some what forward-thinking leadership in ensuring that students continue to have access to low cost federal student financial aid loans to fund their educations.

The FFELP situation has grown bleaker. The announcements by Student Loan Xpress and NorthStar brought the total number of lenders suspending FFELP loans to 42. These lenders originated more than $6.5 billion in FFELP loans in FY 2007. Lenders that have abandoned or suspended federal student financial aid loans provided roughly 13 percent of all FFELP originations in 2007.

Several lenders have also suspended FFELP secondary market operations, which many lenders use to raise capital to make loans. This represents an additional $2 billion in missing funds so far this year. Kennedy’s bill would alleviate some of the strain caused by these missing funds by allowing the Department to serve as a secondary market of last resort for loan providers.

It is too soon to know if the bill will have enough support in Congress to be passed or if the bill will provide enough support to prevent a loan access problem. Many expect a dramatic decrease in active FFELP providers by the time fall semester begins.

The lack and increasing cost of liquidity in the credit markets makes a widespread FFELP loan access problem possible and prompted the NASFAA’s Association Governance and Membership Committee to meet with Kennedy’s staff in March to suggest legislative solutions for a possible loan access problem. Kennedy’s bill is the biggest step that Congress has taken to ensure students’ access to federal student financial aid loans if capital markets do not correct themselves.

Sallie Mae, the nation’s largest college student loan company, is taking another step away from the government backed college student loan business, further exacerbating the sense of crisis hanging over the industry.

Sallie Mae announced today in a letter to colleges that it would no longer offer college student loan consolidations under the federally guaranteed loan program. Students typically consolidate their loans after they graduate, combining loans from each of their years in college into a single student loan to make it easier to manage when paying back the money. Until recent months, college student loan consolidations had been regarded as a highly profitable activity for loan companies because college student loan consolidation usually occurs as students enter years of repayment.

A series of loan companies, however, has been quitting the system of federally guaranteed college student lending in recent months, blaming a combination of cuts in federal subsidy rates put into place last September by Congress and a credit crunch attributed to a surge in mortgage defaults.

Sallie Mae, in its letter today, reiterated that problem, saying that lenders responsible for more than 16 percent of all college student loans last year have now announced their departure from the government backed system.

“As a result,” Sallie Mae said in the letter, signed by its president, Charles E. Andrews, and its executive vice president, Barry Feierstein, “college student loan demand will significantly exceed lender supply for the upcoming academic year.”

As part of preparations for the possibility that some students might not be able to find willing lenders this fall, Education Secretary Margaret Spellings met here today with representatives of guarantee agencies — a group of 35 nonprofit entities that use federal money to repay college student loan companies when borrowers default — to discuss plans for lending federal money directly to students, on an emergency basis if necessary.

In addition to announcing the termination of its college student loan consolidation business, Sallie Mae told colleges that it would no longer pay for students the federally mandated origination fee on government backed loans. “With the large number of lenders exiting the program,” Mr. Andrews and Mr. Feierstein wrote, ”Sallie Mae cannot justify subsidizing some students at the expense of others who may be unable to get funds for college.”

SLM shares rose 23 cents to $17.85 in trading Friday. The stock price started 2007 at $48.80, but began to tumble in October, when Sallie Mae and an investor group led by private-equity firm J.C. Flowers & Co. failed to agree on terms of what originally was to be a $25 billion buyout worth $60 a share. The stock plummeted to $19.68 by year-end.

Sallie Mae reported a loss of $1.6 billion in the fourth quarter as it faced higher borrowing costs and set aside $575 million to cover bad loans. The company is due to report its first-quarter 2008 results next Wednesday.

Under the major federal student loan program, students can consolidate loans after they graduate or leave college. The interest rate on the college student loan consolidation is capped at 8.25 percent and is fixed for the life of the loan.

Sallie Mae said in its annual report for 2007, filed earlier this year, that it was no longer actively marketing federal consolidation loans — which represented 67 percent of its portfolio of government-backed student loans, a proportion it expected to decline steadily. The company said its college student consolidation loan business surged from 2003 to 2006 due to aggressive marketing and low interest rates.

Criminals gain access to personal data such as names, Social Security numbers, and bank and credit card information. Using the stolen data, the criminal can fraudulently obtain credit cards; establish cellular phone accounts, and more.

Reduce Your Risk When Applying for Aid

• Apply for federal student financial aid by filling out the FAFSA at www.fafsa.ed.gov.
• After completing the FAFSA online, exit the application and close the browser; any cookies created during your session will be deleted automatically.
• Don’t tell anyone your Federal Student Financial Aid PIN, even if that person is helping you fill out the FAFSA.
• Review your federal student financial aid award documents and keep track of the amounts applied for and awarded.
• Never give personal information over the phone or Internet unless you made the contact. If you have questions about a solicitation or about your student loan account, call 1-800-4-FED-AID.
• Federal Student Financial Aid securely stores your information on the National Student Loan Data System. However, if you complete or even request a student loan application from a lender, you may be granting the lender permission to access your file. Before providing personal information to an organization, review its privacy policy.
• Shred receipts and documents with personal information if they are no longer needed.
• Immediately report all lost or stolen identification to the issuer and to the police, if appropriate.

Report Fraud and Identity Theft
Report Federal Student Financial Aid Fraud

A company charging for federal student financial aid advice is not committing fraud unless it does not deliver what it promises. For more information about federal student financial aid fraud or to report fraud, call the Federal Trade Commission toll free at 1-877-FTC-HELP (1-877-382-4357) or go to www.ftc.gov/scholarshipscams.

Report Identity Theft

If you suspect that your student information has been stolen, it is important to act quickly. These offices will help you determine what steps to take depending on your situation:

U.S. Department of Education
Office of Inspector General Hotline
1-800-MIS-USED (1-800-647-8733)
OR
Federal Trade Commission
1-877-IDTHEFT (1-877-438-4338)

If you suspect your have information that has been stolen. Do not even hesitate to report it. It is your identity and no other person has a right to it. The only way we can stop this kind of abuse is to report it and fight for what is yours.

Federal student financial aid fraud has become common enough that, in 2000, the College Scholarship Fraud Prevention Act was passed. The Act states that more people should be aware of scholarship scams and asks the U.S. Department of Education (ED) and the Federal Trade Commission (FTC) to step up our awareness efforts. The FTC continues to prosecute fraudsters and has reprinted its Project Scholarship scam poster and bookmark. ED has updated its publications and this web page. We encourage you to display the poster and distribute the bookmark and our Save Your Money, Save Your Identity brochure to all students.

The text for the College Scholarship Fraud Prevention Act of 2000 can be accessed online. You can also order copies of the Project Scholarship Scam Poster/or bookmark on line.

Teacher Loan Forgiveness/Teacher Loan Cancellation
Federal Family Education Loan (FFEL)/Federal Direct Loan Teacher Loan Forgiveness

The Teacher Loan Forgiveness (TLF) Program is intended to encourage individuals to enter and continue in the teaching profession. Eligible applicants can receive loan forgiveness for up to a combined total of $5,000 of subsidized and unsubsidized Federal Family Education Loans (FFEL) or Federal Direct Loans.

The TLF Program is only available if you:

• did not have an outstanding balance on an FFEL or Direct Loan on October 1, 1998, or on the date you obtained an FFEL or Direct Loan after October 1, 1998;
• teach full-time at least five consecutive, complete school years as a full-time teacher in an elementary or secondary school designated as a low-income school;
• are not in default on the loan for which you are requesting forgiveness;
• have not received a benefit for the same teaching service through the AmeriCorps Program;
• completed one of your five years of qualifying teaching service after the 1997-1998 academic year; and
• took the loan for which you are requesting forgiveness before the end of your fifth year of qualifying teaching.

Highly qualified teachers, as defined by the No Child Left Behind Act, can qualify for an increased level of $17,500 in TLF if they have been a full-time teacher for five years.

Federal Perkins Loan Teacher Loan Cancellation

In order to be eligible for Federal Perkins Loan teaching cancellation, you must be teaching full-time at a low-income school, as determined by your State’s education agency. The low-income designation is based on statistics gathered about the population of each elementary and secondary school in your State.

Forged signature

If you believed that someone forged your signature on the loan application, promissory note, or authorization for electronic funds transfer, you may qualify for a loan discharge. You must provide five different samples of your signature, with at least two of the samples on documents that are clearly dated within a year before or after the date of the contested signature.

School owes you a refund

You may also qualify for partial discharge of an FFEL or Direct Loan if your school failed to pay a tuition refund required under federal law. Only the amount of the unpaid refund will be discharged. You may qualify for this refund regardless of whether the school is closed or open.
Death

On your death, your federal student loan debt will be discharged. Your estate will not owe any money on your loan.

Public Service Employee Loan Forgiveness

Section 401 of the College Cost Reduction and Access Act (P.L. 110-84), enacted September 27, 2007, amended the Higher Education Act of 1965. It creates a new Public Service Employee Loan Forgiveness Program for those who have non-defaulted Direct Loans. The program provides for the cancellation of the remaining balance when the borrower has made 120 qualifying monthly payments after October 1, 2007, while employed in certain public service fields. The borrower must also be employed in public service at the time cancellation is approved. The first Public Service Employee loan cancellations cannot be granted before October 2017.

Public service employees who have other types of federal loans must consolidate those into the Direct Loan Program to be eligible for the Public Service Employee Loan Forgiveness Program. Individuals who have already consolidated with another lender can consolidate with Direct Loans as of July 1, 2008.

Since this legislation is new, the Department of Education is reviewing it to determine final, detailed eligibility requirements. Public service employees with Direct Loans should watch for the final regulations and the procedures for applying for loan forgiveness.

Learning is a life long process if you want to be successful, and sometimes as an adult, it is harder to make learning a priority in your life. Financial aid could be an issue along with many other reasons. It is worth pursuing however. Right now, there is still a message in society that your education ends with your final diploma or degree. Several independent studies have shown that somewhere around 20-30% of adults out in the U.S. never read an entire book after they graduate from high school or college. When you willingly put yourself in a position where you are ignorant of changes going on around you, it affects you financially and can hurt your overall quality of life. Many people want to do better, but it can sometimes be hard to know where to start. I want to offer a few ideas that helped me through college and later when I put myself out there in the real world.

Things you will need: The desire to continue learning as an adult, through your own study or going back to school. You will also need the funds to pursue this very worthy opportunity. There are many financial aid opportunities out there. Do not sell yourself short and just say I cannot afford it. You can.

To achieve any goal, you need a plan. Don’t go blindly into college, a new career, or a new business without having some idea of where you are, where you’re going, and how you’re going to reach your goal. I think half the battle in learning is knowing what you want. It is through this that you develop a passion about learning certain topics that both interest you and will help you become a better person.

You will notice once you do go back to school you will do much better than you did in high school. Why? My theory is you are studying something that you have chosen to learn about. Not something the world thinks you need to know.

Do not fear doing something new. Though failure is often seen as bad in the academic world, it is a form of learning. You can talk with successful people in any field and a lot of them will tell you they did not get things perfect the first time. Learning and success are both processes, not destinations. You are never going to reach a point where you feel like you have “arrived.” You can however continue to set more challenging goals as you meet your existing ones.

Take some time to figure yourself out. I wasted a lot of time in college trying to be just like everyone else around me, and it only made me miserable inside. In my case, I had an entrepreneur mentality and was surrounded by people who wanted jobs. It doesn’t make either option bad, but my point is do not let what makes you unique be a curse when it should be a blessing. Do not be afraid to pursue your passion in life even if it makes you stand out from the crowd a little.

Find a learning pace that works for you. In college or just studying things on your own, do not get yourself to the point you are so overwhelmed with information that none of it is sticking. Trying to do too much not only does not work, but it will cause you to associate learning with negative stress. There is nothing wrong with challenging yourself, but keep yourself in check when it comes to that issue. Do not feel like you have to compete against other people younger or older than you to prove yourself as a student. The whole point is to learn, not to compare yourself to others.

Make learning fun. Like anything else in life, the more you enjoy learning the better you will become at it. There are aspects of learning that are skills that you have to develop, but how you do that can be very flexible. So, look at your financial aid options and go for it. I hope these tips have been helpful to you! Good luck and best wishes for your future!

College graduates headed to law school have an array of school loan options to help pay for tuition and other associated fees. A common law school loan offered by the United States Department of Education (DOE) is the Federal Stafford Loan. The Stafford Loan process is identical to every other grant and loan program. To apply, the student must fill out a Free Application for Federal Student Aid (FAFSA). Based on the information provided on the FAFSA, the DOE will determine if the student qualifies for a law school loan and how much that loan will be. An award notice is then mailed to the student via the law school selected on the FAFSA.

Because law school can be an expensive venture, many students cannot pay tuition and living expenses based on the Stafford Loan alone. Several private bank lenders offer law school loans and law bar exam loans for this very reason. When a student applies for a law school loan through a private lender, the funding is granted based on his or her credit score and history. This is different from the DOE loan process that takes economic need into consideration in lieu of credit worthiness.

Interest rates, deferment and forbearance options, and repayment plans all vary dependent upon the loan program. DOE law school loans feature below prime interest rates because the federal government backs them. The government also guarantees several repayment plans that are flexible in nature to help meet all borrowers’ needs. In addition, federal law school loans come with a pre-determined grace period and in-school deferment period. Private law school loans, on the other hand, are a little different. The interest rate of a private loan will depend a lot on the borrower’s credit score. Borrowers with excellent credit run the best chance of receiving a low rate. Lastly, the deferment and grace periods and repayment options vary by student loan lender.