Understanding Financial Aid and Student Loans

There are various ways of paying for college. Student financial aid can include college scholarships, student loans, grants, or work study. Use the links below to learn about the different types of federal and private loans available. Also check out this Federal Student Loan Comparison Chart and Interest Rates for Federal Student Loans.

Federal Stafford Loans

The Federal Stafford Loan has interest rates well below average and special repayment schedules. The money you borrow must be used for school costs including tuition, fees, books, supplies, and room and board.

Subsidized Stafford Loans

The federal subsidized Stafford loan is a low-interest loan made to students who demonstrate financial need. Undergraduates may borrow up to $3,500 for the first year, $4,500 for the second year and $5,500 for each remaining undergraduate year. Undergraduate students may borrow an aggregate limit of $23,000 in subsidized Stafford loans. Independent students may have additional eligibility under the unsubsidized Stafford loan.

Graduate and professional students may borrow up to $20,500 a year for a total of $138,500 (this includes undergraduate subsidized and unsubsidized Stafford loans). The interest rate is fixed if the loan is disbursed after July 1, 2006. Interest on subsidized Stafford Loans is paid by the federal government while the borrower is enrolled in school at least half-time. Repayment begins six months after the student graduates, withdraws from school, or drops below half-time status. Repayment may take as long as 25 years based on the total outstanding balance.

Unsubsidized Stafford Loans

Students with unsubsidized Stafford loans are responsible for paying the interest while enrolled in school and during any grace period or deferment. This loan is not based on financial need. A student may opt to have the interest deferred and accrued or choose to pay the interest payments while enrolled. Students may borrow a combination of subsidized and unsubsidized loans but may not exceed the annual or maximum loan limits. Repayment terms are the same as for the federal subsidized Stafford Loan.

Until July 1, 2008, the interest rate for unsubsidized loans are the same as for the subsidized Stafford loan. On or after July 1, 2008, subsidized Stafford loans for undergraduate students have a slightly lower rate than the unsubsidized Stafford.

» See also the Federal Student Loan Comparison Chart.

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Federal Parent PLUS Loans

The Federal Parent PLUS Loan is for parents of dependent students and is based on credit worthiness. Under this loan program, parents may borrow up to the cost of education at a particular institution minus any financial aid a student receives. Repayment of a PLUS Loan begins within 60 days of final disbursement and can take up to 25 years based on the total outstanding balance.

Eligibility for a Parent PLUS Loan

Parent PLUS Loans are available to parents of dependent, undergraduate students. An eligible parent borrower is a dependent student's natural or adoptive mother or father. The spouse of a parent who has remarried is an eligible borrower if his/her income and assets were taken into consideration when completing the Free Application Federal Student Aid (FAFSA).

You must be a U.S. Citizen, U.S. national or eligible non-citizen to qualify. Credit guidelines will apply in determining your eligibility. You are eligible for a PLUS Loan for each child who is enrolled at least half time in school and meets the school's standards for satisfactory academic progress. Eligibility for PLUS Loans is not based on need or income.

PLUS Loan Repayment

A Parent PLUS Loan is made directly to the parent, not the student, so responsibility for repayment rests with the parent. You may borrow up to the cost of the student's education less any other financial aid awarded. Repayment begins within 60 days of the final loan disbursement, unless you choose to postpone repayment while the student is in school at least half-time.

Choose from a variety of repayment options. Interest-only payments are available when the student is enrolled in school at least half-time. You can postpone your loan repayment if you meet current guidelines for an in-school, unemployment or financial hardship deferment. Your minimum monthly payment is $50. The maximum repayment term is 10-25 years, based on your total loan balance.

Deferment Options for ParentPLUS Loans

Federal legislative action made important changes to PLUS Loans, effective for loans first disbursed on or after July 1, 2008. Parent borrowers may request deferment during any period when they themselves are enrolled at least half time or when the student on whose behalf the loan was borrowed is enrolled at least half time and during the six-month period that begins the day after the date the student ceases at least half-time enrollment.  PLUS Loans made to graduate and professional student borrowers may be deferred during the six-month period that begins the day after the end date of a deferment during which the borrower was enrolled at least half time.  Interest will continue to accrue on the loan during these periods. Parent borrowers are responsible for requesting each of these deferment options.

To request this deferment, please contact us.

» See also Interest Rates for Federal Student Loans

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Federal GradPLUS Loans

PLUS Loans for Graduate and Professional Students

A PLUS loan option is available to help graduate students and professional students pay for college. As of July 1, 2006, a graduate student or professional student may borrow a Federal PLUS loan to help with educational expenses. With benefits similar to the traditional PLUS loan for parents, the graduate student PLUS loan program (Grad PLUS) allows graduate students or professional students to borrow up to the cost of education at a particular institution minus any other financial aid. The Grad PLUS loan is meant to fill the gap between your financial aid package and the cost of education - your school must determine your Federal Stafford loan eligibility before you apply for a Grad PLUS loan. With the Grad PLUS loan, the student is the borrower, not the parent.

There are credit requirements for the Grad PLUS loan, but no debt-to-income ratios or credit scoring are used. If you are denied based on adverse credit, you may apply with a credit-worthy endorser who is secondarily responsible for the loan. The endorser must be a credit-worthy U.S. citizen, permanent resident, or other eligible non-citizen.

The Grad PLUS loan interest rate is a fixed rate of 8.5 percent, and some discounts on the rate may be available. With high approval rates and a low, fixed student loan interest rate, this federal loan option gives graduate students and professional students an alternative to private student loans. Since private student loans often have variable interest rates, the fixed rate of the Grad PLUS loan allows for better debt management and can result in significant savings.

  Grad PLUS Loan Private loan
with co-signer
Private loan
without co-signer
Amount borrowed $10,000 $10,000 $10,000
Interest rate 8.5% 9.5% 14.5%
Total interest paid* $4,878 $5,528 $8,632

*Assumes a 10-year repayment term

Deferment Options for GradPLUS Loans

Federal legislative action made important changes to PLUS Loans, effective for loans first disbursed on or after July 1, 2008. Parent borrowers may request deferment during any period when they themselves are enrolled at least half time or when the student on whose behalf the loan was borrowed is enrolled at least half time and during the six-month period that begins the day after the date the student ceases at least half-time enrollment.  PLUS Loans made to graduate and professional student borrowers may be deferred during the six-month period that begins the day after the end date of a deferment during which the borrower was enrolled at least half time.  Interest will continue to accrue on the loan during these periods. Parent borrowers are responsible for requesting each of these deferment options.

To request this deferment, please contact us.

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Supplemental or Private Student Loans

As you determine the best way to finance your education, you should consider the full range of student financial aid options available to you. Private loans are often used to supplement federal student loans, when federal loans are not sufficient to cover the full cost of education.

Private student loans also offer students flexibility in choosing a school or participating in a specialized course of study when federal student loans aren't an option. You will need to work with your school to make informed decisions about which sources of funding are right for you.

Private student loans are for students (at the age of majority), parents of students, other guardians or credit-worthy related co-signers or "co-makers". While many alternative student loan programs require strict, non-negative credit and evidence of repayment capacity, individuals can sometimes borrow from $2,000 up to $15,000 and more per academic year based on cost of attendance minus other financial aid awarded. Interest rates for private student loans are generally variable student loan interest rates adjusted quarterly based on an index plus some percentage.

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