Obtaining Educational Loans
Most financial aid packages that may include: academic scholarships, institutional need based grants, federal grants, state grants, and federal work study still fall short of the total cost of tuition plus room and board. Most families do not have the funds to pay the remaining balance and will need to turn to loans to cover the remaining costs. College Questions Online suggests students and families consider the following loan opportunities:
- Federal Stafford Loan: The Federal Stafford Loan is the only true student loan because eligibility is not based on credit history. Many students are unable to secure student loans without a parent cosigner because other loan options require an established credit history. Nearly all undergraduate and graduate students who are enrolled at least half time are eligible to receive a Federal Stafford Loan. There are two types of Stafford Loans, the "financial need" of the student as determined by the student's FAFSA application determines eligibility for one of the following:
- Subsidized Federal Stafford Loan: Students or families that demonstrate "financial need" as determined by FAFSA may be eligible for the Subsidized Federal Stafford Loan. This subsidized loan is the best education loan option available because interest does not accrue while student is enrolled. Additionally, all payments can be deferred until 6 months after graduation and interest does not accrue during the deferment period. When interest does begin to accrue on a Subsidized Federal Stafford Loan it is at a low fixed interest rate, currently 4.5%.
- Unsubsidized Federal Stafford Loan: All students and families are eligible for the Unsubsidized Federal Stafford loan because eligibility is not based on "financial need." Interest begins to accrue as soon as funds are distributed to the school but payments can be deferred until 6 months after graduation. The Unsubsidized Federal Stafford Loan has a fixed interest rate of 6.8%.
- Federal Perkins Loan: The Federal Perkins Loan Program provides low-interest loans to help needy students finance the costs of postsecondary education. Students can receive Perkins loans at any one of approximately 1,800 participating postsecondary institutions. Institutional financial aid administrators at participating institutions have substantial flexibility in determining the amount of Perkins loans to award to students who are enrolled or accepted for enrollment.
- Federal Parent Plus Loan: The Federal PLUS Loan is a loan borrowed by a parent on behalf of a child to help pay for tuition and school related expenses at an eligible college or university, or by a graduate student for graduate school. The student must be enrolled at least half time, and the parent or graduate student must pass a credit check in order to receive this loan.
- PLUS Loan interest rates are fixed for all new PLUS Loans at a rate of 7.9% as of July 1, 2010.
- You may receive a 0.25% repayment interest rate credit when payments are set up for automatic debit from a bank account
- Interest may be tax deductible under the Hope Education Tax Credit.
- There is no penalty for early repayment, and consolidating your loans after each academic year is easy. It also lowers your monthly payment.
- Funds are usually disbursed quickly, during the first weeks of the semester. Interest accrues from the time of disbursement.