What Financial Aid Is Available To Me?
College Student Loans are far the single largest financial aid program available to college students. A college student loan is extremely easy to receive and very often a college student’s first venture into the world of finance. Because college student loans must be repaid, the decision to borrow for college should be made carefully.
Completing the free online FAFSA will be the first step in determining your college student loan eligibility. Once the EFC has been calculated, additional steps will be ask of you to actually receive the college student loan proceeds at your institution. This will generally involve completing a paper or electronic promissory note. Let’s briefly look at the different college student loan programs available to students and their parents:
Stafford Loan. Stafford College Student loans are student loans that the student will borrower in their own name. There are two types of Stafford college student loans: subsidized and unsubsidized. Subsidized college student loans have the government paying the interest for the student while they are in school and during their grace and deferment periods. Unsubsidized college student loans have interest accruing while the student is still attending school.
Subsidized college student loans are based on need while unsubsidized college student loans are not need-based. Both student loans are not required to be repaid for six months after the student graduates or drops below half time. Interest rates on a Stafford college student loan will be fixed at a rate of 6.8% for all student loans disbursed after July 1, 2006.
The maximum yearly amount a independent student or undergraduate student may borrow in combined subsidized/unsubsidized Stafford college student loan eligibility is:
• $2,625 for freshmen
• $3,500 for sophomores
• $5,500 for juniors and seniors
The maximum yearly amount an independent student, undergraduate student or dependent student whose parent have been denied a PLUS college student loan may borrow in combined subsidized/unsubsidized Stafford college student loan eligibility is:
• $6,625 for freshmen (maximum of $2,625 subsidized)
• $7,500 for sophomores (maximum of $3,500 subsidized)
• $10,500 for juniors and seniors (maximum of $5,500 subsidized)
The maximum yearly amount a graduate college student may borrow in combined subsidized/unsubsidized Stafford college student loan eligibility is:
• $18,500 (maximum of $8,500 subsidized)
Stafford college student loans will carry with them fees and interest charges that should also be considered when making the decision to borrow such a student loan. Stafford college student loans will also come standard with a ten year repayment plan with a minimum payment of $50. There is no penalty for paying the college student loan off early.
Parent Loan for Undergraduate Students (PLUS). A PLUS college student loan is a loan made available to credit-worthy parents of dependent students and undergraduate students. The maximum yearly amount a parent may borrow under this program is the student’s cost of attendance minus any other financial aid assistance they have received.
Perkins Loan. These college student loans are funded by federal and institutional dollars and given to the neediest undergraduate and graduate college students. They carry a 5% interest rate and will not have to be repaid for nine months after the student has graduated or drops below half time. The maximum an undergraduate college student can borrow is $4,000 annually and $6,000 annually for graduate college students.
Private loan. Recently, there have been large increases in private college student loans funded in order to fill a gap created by the rising cost of education while federal college student loan limits have remained relatively dormant. Some schools have begun actively awarding private college student loans on the award letter since the demand is so strong. Private college student loans are inherently more costly as they carry higher interest rates and fees than a federal college student loan. The higher rates and fees are of course due to the private lenders owning 100% of the risk of lending out the money. The federal government does not back these student loans as they do with Stafford, PLUS and Perkins loans.
