Student Loans
Parent’s Section
A Parent PLUS loan is a perfect way to help your child meet his or her education financing goals. Parents can apply for a loan that will cover any expenses that are not met by Stafford loans. These loans have a fixed 8.5% interest rate, and you can start to repay them 60 days after the loan has been disbursed or 6 months after your son or daughter drops below half-time enrollment. Learn more about Parent PLUS loans.
There are many different types of federal and private education loans are offered to students and their parents.
In general, to be eligible for federal student loans, you must:
- – Have a high school diploma or a GED (General Education Development) certificate, or an equivalent home-schooling certificate
- – Be working toward a degree, certificate, or qualification in an eligible program
- – Be a U.S. citizen; or an eligible non-citizen, such as a U.S. national (includes natives of American Samoa or Swain’s Island); or a U.S. permanent resident who has an I-151, I-551, or I-551C (Permanent Resident Card). See the Federal Student Aid eligibility page for further details
- – Have a valid Social Security Number, unless you are a resident of the Republic of the Marshall Islands, Federated States of Micronesia or Republic of Palau
- – Register with the Selective Service (if required). This can be done directly on the FAFSA application
- – Demonstrate financial need (subsidized and Perkins loans) or good credit (PLUS loans)
- – Maintain satisfactory academic progress once in school
- – Not be in default on any federal student loan
- – Certify that your federal student aid will be used only for educational purposes
Keep in mind: Borrow wisely, and borrow as little as necessary. The less you borrow now, the less you will have to pay back when your education is complete.
Here are the different types of federal loans:
| Who Can Borrow |
Undergraduate students who are U.S. citizens |
|---|---|
| Loan Limits |
Undergraduates can borrow up to $5,500 a year for a maximum of $27,500. Graduate students may borrow up to $8,000 per year for a maximum of $60,000. Participating schools receive a limited amount of Perkins Loan money each year, so submit your application early to be considered for these funds. |
| Repayment Terms |
Repayment begins 9 months after you graduate, withdraw, or fall below half-time. Your school serves as the lender for this type of loan, and you make payments to your school or the school’s appointed agent. You have up to 10 years to complete repayment, depending on the amount you owe. Perkins Loan interest is paid by the federal government while you are in school and during grace and deferment periods. Once you are in repayment, you assume the payment of interest. |
| Interest Rate |
Perkins Loans have a fixed interest rate of 5% throughout the life of the loan. |
| Who Can Borrow |
Undergraduate students enrolled at least half-time in a degree or certificate program. Based on the student’s financial need. U.S. citizens or eligible non-citizens. |
|---|---|
| Loan Limits |
Undergraduate independent students and dependent students may borrow up to $3,500 in their first year, up to $4,500 in their second year, and up to $5,500 in their third year and beyond, for a maximum of $23,000. Graduate students may borrow up to $8,500 per year for a maximum of $65,000 (which includes any undergraduate subsidized Stafford Loans as well). |
| Repayment Terms |
Repayment begins 6 months after you graduate or drop below half-time. Interest is paid by the federal government while you are in school and during grace and deferment periods. Under certain conditions, you may request a deferment–a repayment postponement–of principal and interest. Typically, you have up to 10 years to complete repayment, and you may choose from various repayment plans. There are no penalties for prepayment, or finishing repayment ahead of schedule. |
| Interest Rate |
For undergraduates, subsidized Stafford Loans have a fixed interest rate of 6.8% throughout the life of the loan for loans disbursed before July 1, 2008. The interest rate is 6% for loans disbursed on or after July 1, 2008, and before July 1, 2009. For loans disbursed on or after July 1, 2009, and before July 1, 2010, the interest rate is 5.6%. Subsidized Stafford Loans have a fixed interest rate of 6.8% for graduate students. |
| Who Can Borrow |
Undergraduate students enrolled at least half-time in a degree or certificate program. Not based on need. U.S. citizens or eligible non-citizens. |
|---|---|
| Loan Limits | Dependent undergraduate students may borrow up to the maximum of $31,000 in Stafford Loans. Each year, undergraduate dependent students may borrow a base amount in either subsidized or unsubsidized Stafford Loans depending on the student's need, as calculated by the U.S. Department of Education. The base amount may be up to $3,500 in the borrower's first year of school, up to $4,500 in the second year, and up to $5,500 in the third year and beyond. In addition to that amount, if a student's aid has not exceeded the cost of attendance, the student may be eligible for up to an additional $2,000 per year in unsubsidized funds. Undergraduate independents and dependents whose parents are unable to obtain a PLUS Loan may borrow a base amount of Stafford Loans that are either subsidized or unsubsidized loans depending on the student's need. The base amount may be up to $3,500 for students in their first year of school, up to $4,500 in their second year, and up to $5,500 in their third year and beyond. Additionally, if a student's aid has not exceeded the cost of attendance, the student may be eligible for up to an additional $6,000 in their first and second years and up to an additional $7,000 in their third year and beyond in unsubsidized funds. Undergraduate independent students and dependent students whose parents are denied Federal PLUS Loans may borrow up to the maximum of $57,500 in Stafford Loans. Graduate students may borrow a base amount of Stafford Loans that are either subsidized or unsubsidized loans depending on the student's need. The base amount may be up to $8,500, and additionally, if a student's aid has not exceeded the cost of attendance, the student may be eligible for up to an additional $12,000 in unsubsidized funds, with an annual limit of $20,500 (for both subsidized and unsubsidized Stafford Loans). Graduate students may borrow up to a maximum of $138,500 in Stafford Loans (which includes all undergraduate Stafford Loans as well). |
| Repayment Terms |
Repayment begins 6 months after you graduate or drop below half-time. Typically, you have up to 10 years to complete repayment, and you may choose from various repayment plans. There are no penalties for prepayment, or finishing repayment ahead of schedule. Interest accrues upon disbursement of loan funds and may be paid monthly or quarterly. You may also choose to allow interest to accrue while you are in school, but the interest you owe will be capitalized, which means the interest is added to the principal. Under certain conditions, you may request a deferment of principal and interest. |
| Interest Rate |
Fixed at 6.8% for undergraduate and graduate loans. |
| Who Can Borrow |
Borrowers with 1 or more federal student loans who would like to make one monthly payment and secure a fixed interest rate. U.S. citizens or eligible non-citizens. |
|---|---|
| Loan Limits |
Consolidation loans have no maximum limit. Some lenders require a minimum balance owed in order to consolidate. |
| Repayment Terms |
Repayment periods vary based on the amount consolidated. Consolidation loans may not be reconsolidated unless other applicable education loans are included. Under certain conditions, you may request a deferment of principal and interest, and interest may continue to accrue during the deferment period. You may extend your loan repayment beyond the standard 10 years in order to reduce monthly payments, which will increase the amount of interest you pay over the life of the loan. You may choose from various repayment plans. There are no penalties for prepayment, or finishing repayment ahead of schedule. |
| Interest Rate |
The interest rate for consolidation loans is calculated by taking the weighted average of all interest rates on loans being consolidated and rounding up to the nearest ⅛ of a percent. Once your loans are consolidated, they have a fixed interest rate. |
| Who Can Borrow |
Natural or adoptive parents or stepparents (in some cases) of eligible dependent undergraduate students who are enrolled at least half-time. U.S. citizens or eligible non-citizens. This is not a need-based loan. Borrowers must have credit in good standing. |
|---|---|
| Loan Limits |
Amounts up to the total cost of attendance at the student’s school (as determined by the school), minus all other aid received, may be borrowed. These loans have no annual or total borrowing limit. |
| Repayment Terms |
For loans disbursed before July 1, 2008, repayment begins on the loan’s principal and interest as soon as it is fully disbursed. Under certain conditions, borrowers may request a deferment of the loan’s principal and interest, and interest will continue to accrue during the deferment period. Typically, you have up to 10 years to complete repayment, but you may choose from various repayment plans. There are no penalties for prepayment, or finishing repayment ahead of schedule. For loans disbursed on or after July 1, 2008, the borrower may choose to start repayment either (a) no later than 60 days after the loan is fully disbursed or, (b) upon request, 6 months after the student for whom the loan was borrowed drops below half-time enrollment. |
| Interest Rate |
Fixed interest rate of 8.5% throughout the life of the loan. |
| Who Can Borrow |
Credit-worthy graduate or professional students enrolled at least half time in a degree or certificate program. |
|---|---|
| Loan Limits |
Borrowers may borrow up to the total cost of their education, minus all other aid received. These loans have no annual or total borrowing limit. |
| Repayment Terms |
For loans disbursed before July 1, 2008, no payments are required while the borrower is in school; however, if he or she graduates, withdraws, or drops below half-time enrollment, there is no grace period before repayment begins. For loans disbursed on or after July 1, 2008, repayment starts 6 months after the student drops below half-time enrollment. There are no penalties for prepayment or for finishing repayment ahead of schedule. |
| Interest Rate |
Grad PLUS Loans have a fixed interest rate of 8.5%. |
Direct vs. FFELP Loans
There are 2 major programs that help students get loans: The Federal Family Education Loan Program (FFELP) and the William D. Ford Federal Direct Student Loan Program. Both offer loans on similar terms, and in general schools will choose one or the other for all their financial aid lending.
The major difference between the two is that FFELP loans are handled through banks, credit unions, and lenders, while Direct Loans are borrowed directly through the federal government. For Direct Loans, the school usually acts as the loan holder and disburser of the funds.
Interest rates on FFELP and DL loans may differ slightly. For example, a Grad PLUS loan through the FFELP program has an 8.5% interest rate, while a Direct Grad PLUS loan’s interest rate is 7.9%.
To find out more about the Direct Loan Program, visit the Department of Education’s Direct Loan site.
Private Loans
If you cannot meet all your educational expenses through federal loans, private loans are another option.
Private loans (also called “alternative loans”) differ from federal loans in that they are not guaranteed by any government agency, and they are made independent of the financial aid structure of your school. Either you or a parent may take such a loan out. These loans have a variety of interest rates, payment structures, and length of time to repay.
One drawback of private loans is that they do not have many of the repayment options that are available with federal loans, such as deferments, forbearances, or income-sensitive repayment. However, private loans may be an important option if you do not qualify for enough other forms of aid.
