The federal government is by far the single largest source of financial aid to college students, but there are also state government loans, college-sponsored loans, commercial lending institutions and credit unions which also offer private student loans. Qualifying for funding involves filling out multiple forms, including the Free Application for Federal Student Aid (FAFSA), and providing a detailed profile of your financial situation to potential lenders. As with all financial aid applications, it is important to fill out the forms completely and submit them as soon as possible.
Federal Student Loans
- Direct Student Loans (formerly known as Stafford)| Offered by the federal government, these low-interest loans are for eligible students to help cover the cost of higher education at a four-year college or university, community college, or trade, career, or technical school. Eligible students borrow directly from the U.S. Department of Education (the Department) at participating schools. Direct Loans include both subsidized and unsubsidized loan options.
- Direct Subsidized Loans– Direct Subsidized Loans are for students with financial need determined by the U.S. Department of Education based on the information reported by the student on their FAFSA. Interest is paid by the government while you are enrolled at least half-time, during the six month grace period, and in deferment. The loan payments may be deferred while in school.
- Direct Unsubsidized Loans– you are not required to demonstrate financial need to receive a Direct Unsubsidized Loan. Unlike the subsidized option, you are responsible for paying the interest that accumulates while you are enrolled at least half-time, during the grace period and during deferment. The loan payments may still be deferred while in school.
- Perkins| The Federal Perkins loan has a fixed interest rate of 5.00% and a longer grace period than the standard direct loans. Perkins loans offer a low-interest loan for both undergraduate and graduate students with exceptional financial need. Exceptional financial need is determined by the U.S. Department of Education based on the information reported by the student on their FAFSA. Federal Perkins Loans are made through a school’s financial aid office. Your school is your lender, and the loan is made with government funds. You must repay this loan to your school or your school’s loan servicer. More information is available at your school’s financial aid office.
Alternative Student Loan Options
- Private| Private student loans are meant to fill the gap in financial aid that is left between the Cost of Attendance (COA) and the Federal loans/aid you’ve received. Private loans are not offered through the federal government, so it’s important to look for a loan program from an institution you trust, like your credit union’s Student Choice solution. These loans are in the name of the student but often require a co-signer. They are not guaranteed or subsidized by the government. Instead, they are based on the credit qualifications of the student and/or the credit qualifications of any co-signer they have on the loan.Look for a loan with zero origination and other additional fees, low interest rates, flexible deferment and repayment options, and an easy application process. You’ll also want to make sure that the loan is certified through the school – which means the school verifies the amount you need to borrow to prevent you from borrowing too much or too little. Funds should be given directly to the school and any difference back to the borrower for books, transportation, technology and other educational expenses.
- Federal PLUS (Parent Loan for Undergraduate Students)| Parents of dependent students may apply for a Federal PLUS Loan to help pay their child’s education expenses as long as certain eligibility requirements are met. These loans are in the parent’s name, cannot be transferred to the student, and include origination and other fees. Graduate and professional students may apply for PLUS Loans for their own expenses.
- Deadlines| You should fill out your FAFSA as early as possible. You can complete your FAFSA as early as January 1st of the academic year for which you’re applying, through June 30th of the following year. That means you have 18 months to complete the form. However, some states and colleges have much stricter deadlines, some as early as March. Apply as early as possible to maximize your eligibility for available scholarships, grants and aid.
- Rates and Conditions | Each loan may have different rates and conditions for borrowing. Make sure you know the interest rate, how it’s calculated, and the benefits each option offers.
- Fees| Federal student loans and many private student loans include fees for origination. Some loans include additional fees. Make sure you understand what fees are included in your loan and how that will affect your loan amount and repayment. When you’re searching for loan options, look for those that have zero origination or other additional fees.
- Repayment Options| Make sure you know what options are available to you and choose the option that is right for you. Full deferment (of principal and interest) is a flexible option because payments are delayed until after graduation and grace periods, but you can still make voluntary payments to reduce your loan amount without fear of penalty or missing a payment. Payment of interest while you’re in school means you’ll pay the interest while you’re in school to help reduce your total debt, but can be difficult while attending class or trying to work.
- Resources and LinksFor more information about the FAFSA, federal student loans, and other programs, please take a look at the links below: