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| Detailed Loan Information |
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Student loans have become an essential component in financing students’ educational expenses. Loans, by definition and regulation, must be repaid and therefore should be used sparingly and wisely. If you accept a loan you are responsible for repaying the loan plus interest. Remember that the more you borrow the higher the monthly repayment will be, so only take as much loan money as you will need. To calculate your monthly repayment, use the following link: Standard Repayment Calculator
Each loan program has specific eligibility criteria, repayment, cancellation, and deferment conditions. The following descriptions are intended to provide enough general information for students and parents to make informed decisions about taking out a student loan. Additional information can be found at www.studentaid.ed.gov under "Federal Student Aid Programs."
Federal Direct Stafford Loan Program
The Federal Direct Stafford Loan Program is a federally sponsored and regulated national student loan program for undergraduate and graduate students. The Federal Direct Stafford Loan can come in the form of a Subsidized or an Unsubsidized Loan (or a combination of both). This loan is awarded by the University, and funds are borrowed directly from the federal government. No payments are required until 6 months after the student graduates or drops below half time enrollment. The Federal Direct Stafford Loan also has a maximum repayment period of 10 years. A small origination fee (net 0.5%) is assessed at the time each loan is made. The borrower will receive a disclosure statement from the Direct Loan Servicing Center regarding the amount of his/her loan and the anticipated disbursement dates.
Eligibility for the Subsidized Stafford Loan is based on financial need as determined by the federal processor and the Financial Aid Office (FAO). For 2011-12 the Subsidized loan has a fixed interest rate of 3.4%.
Students without financial need may be eligible for an Unsubsidized Stafford Loan. The interest on the Unsubsidized Stafford Loan begins immediately and accrues at 6.8%. Students can pay the interest quarterly or allow the interest to add to the principal.
The yearly maximums for the Federal Direct Stafford loan program are below. The loan will be subsidized or unsubsidized (or a combination of both) based on financial need.
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Dependent |
Independent |
Freshman |
$5,500 (up to $3500 Subsidized) |
$9,500 (up to $3,500 Subsidized) |
Sophomore |
$6,500 (up to $4500 Subsidized) |
$10,500 (up to $4,500 Subsidized) |
Junior |
$7,500 (up to $5500 Subsidized) |
$12,500 (up to $5,500 Subsidized) |
Senior |
$7,500 (up to $5500 Subsidized) |
$12,500 (up to $5,500 Subsidized) |
Graduate |
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$20,500 (up to $8,500 Subsidized) |
Over their academic careers, dependent undergraduate students may borrow a maximum of $31,000 in the Stafford Loan Program, with no more than $23,000 in Subsidized Stafford Loan. Independent undergraduate students may borrow up to $57,500 in Stafford loans, with no more than $23,000 in Subsidized Stafford Loan. Graduate students may borrow up to $138,500 in total Stafford loans, with no more than $65,500 in Subsidized Stafford loan.
First time borrowers of the Federal Direct Stafford Loan are required to complete an Entrance Interview and a Master Promissory Note. Students normally only have to complete Direct Loan Entrance Counseling and Direct Loan Master Promissory Note once in their academic career.
Federal Direct Parent PLUS Loan
The Federal Direct Parent PLUS loan is also a federally sponsored and regulated national student loan program. The PLUS Loan enables credit-worthy parents of undergraduate, dependent students to borrow funds to pay for their child’s educational expenses. The funds are borrowed directly from the federal government, and the loan is held by the parent, not the student. The loan amount may not exceed the student's estimated cost of attendance minus any other financial assistance (financial aid, scholarships, etc) the student has been given. A net fee of 2.5% is assessed at the time the loan is made. The interest rate is fixed at 7.9%.
The Federal Direct PLUS Loan does require a credit check and some parents may not be eligible for the loan. If a parent is turned down for a PLUS loan and receives notification of denial, the parent should keep a copy of the denial and contact the Financial Aid Office, as there may be other options available to the student.
Repayment generally begins 60 days after the final disbursement of the loan, although parents do have the option to defer payments on the loan while the undergraduate student on whose behalf they borrowed the PLUS loan is in-school and for a six-month grace period after the student drops below full-time enrollment. Interest will accrue on this loan if the parent chooses to defer it.
In order to apply for the Federal Direct Parent PLUS Loan, parents should navigate to the Parent section in order to determine what steps are needed.
Federal Perkins Loan
A low-interest (5.0%) loan for both undergraduate and graduate students with exceptional financial need. Your school is your lender. The loan is made with government funds with a share contributed by the school. You must repay this loan to your school.
Eligibility for the Perkins Loan is based on financial need (as determined by the federal processor and the FAO) as well as the availability of funds. Perkins loan awards are made to students using need and timing of application as criteria.
This loan has a fixed interest rate of 5% and a maximum of 10 years to repay. No payments are due and no interest accrues on the loan until 9 months after you leave school or drop below half time status. Cumulative borrowing limits are $20,000 for an undergraduate degree and $40,000 for a graduate degree. To calculate your monthly repayment, use the following link: www.finaid.com/calculators/loanpayments.phtml.
Deferment and cancellation provisions are contained on the Master Promissory Note, which you must complete prior to receiving the loan for the first time. An Entrance Interview must also be completed prior to receiving the loan, and an Exit Interview is required upon leaving the University.
First time borrowers must complete a Perkins Entrance Interview and Master Promissory Note. The process is similar to the Direct Federal Stafford Loan Entrance and Master Promissory Note process only they are performed in one step.
Consolidation Loans
A Consolidation Loan allows you to combine all of your federal student loans (i.e. Stafford and Perkins Loans) you received into a single loan (and a single payment). You cannot combine the federal loans with private loans you may have taken out. Consolidation also may extend the length of repayment beyond the federal maximum of 10 years which lowers your monthly payment but increases your overall cost of the loan. Parents can also consolidate their Parent PLUS Loans if they have borrowed several loans over time.
If you have questions regarding consolidation, please make an appointment to speak with a Financial Aid Adviser.
Alternative Educational Loans
After the traditional loan options such as Perkins, Stafford and PLUS have been exhausted, students can look into the Alternative Loan market. Unlike the Federal Loan Programs, alternative loans are not regulated by the government. Each lender has its own set of application, credit, and co-signer requirements, and interest rates are variable, not fixed. Generally, alternative student loan payments are deferred while the student is in school (with the interest on the loan accruing). Students should inquire whether this is an option for their loan and for how long the loan will be deferred.
In choosing a lender, it’s always a good idea to start with a lender that you currently work with or you know has been in the student loan business for a significant amount of time. Be cautious of lenders whose names you do not recognize or those who offer you ‘teaser’ or introductory rates or prize incentives. Below are some questions you should ask when considering an alternative loan lender.
- What is my interest rate? Lenders will advertise ‘as low as’ rates but it’s important to know what your rate will be.
- How often will my rate change?
- What fees am I being charged (reducing my proceeds)?
- How often do you capitalize interest on the loan? Lenders who capitalize interest less frequently will save you more money over time.
- Is there a prepayment penalty?
- Can I defer payments while I am in school or if I have financial difficulty?
- What benefits or rate discounts are offered, and what conditions do I have to meet to obtain the benefits?
- Is it important to me that my lender have local presence?
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