FINANCIAL AID: Loans
Federal Stafford Loan Program
Stafford Loans are federal student loans made available to college and university students to supplement personal and family resources, scholarships, grants, and work-study. Nearly all students are eligible to receive Stafford loans regardless of credit. Stafford loans may be subsidized by the U.S. Government or unsubsidized depending on the student's need.
1. Subsidized Stafford Loan
The subsidized Stafford loan is the best, first choice for students looking to borrow money for education.
What are the benefits of a subsidized Stafford loan?
Low fixed interest rate, as low as 5.60%
No payments while enrolled in school or in deferment
No interest while enrolled in school or in deferment
Acceptance not based on credit
Who is eligible for a subsidized Stafford loan?
In order to be eligible for the subsidized Stafford loan, you must meet the following qualifications:
US Citizen or eligible non-citizen
Enrolled half-time or more in an accredited academic program
Have completed the FAFSA
Have completed high school or equivalent (e.g. GED)
Not in default or delinquent on any existing federal loan
Once you complete the FAFSA and receive the results, the Department of Education and your school will determine your final eligibility for the subsidized Stafford loan and what amount you may borrow, if any.2. Unsubsidized Stafford Loan
An Unsubsidized Stafford Loan is a federally guaranteed loan that is not based on financial need. Interest will accrue from the time the loan is disbursed to the school. You do not have to make interest or principal payments until six months after graduation, or six months after you drop below a half time status.
Unsubsidized Stafford Loan Benefits
Increased limits - borrow up to $2,000 more
Fixed interest rate - 6.8%
No payments required while enrolled in school
Federal Perkins Loans
A Federal Perkins Loan is a low-interest (5%) loan for both full-time and part-time undergraduate, graduate, and professional degree students with financial need. Your school is your lender. The loan is made with government funds, and your school contributes a share. You must repay this loan to your school. In general, schools are reimbursed for 100 percent of the principal amount of the loan canceled, and the reimbursement must be reinvested in the school's revolving loan fund. These institutional reimbursements for loan cancellations are an entitlement.
How much can I borrow?
Depending on when you apply, your level of need and the school's funding level, you can borrow up to
- $4,000 for each year of undergraduate study (the total amount you can borrow as an undergraduate is $20,000).
- $6,000 for each year of graduate or professional study (the total amount you can borrow as a graduate/ professional student is $40,000, including any Federal Perkins Loans you borrowed as an undergraduate)
Other than interest, is there any charge to get these loans?
No, you're not charged any fees to take out the loan. But, if you skip a payment, make a payment late, or make less than a full payment, you might have to pay a late charge. If you continue not making payments as required, you might have to pay collection costs as well.
How will I be paid?
Your school will either pay you directly (usually by check) or credit your account. Generally, you'll receive the loan in at least two payments during the academic year.*
PLUS Loans for Parents
Parents can borrow a PLUS Loan to help pay your education expenses if you are a dependent undergraduate student enrolled at least half time in an eligible program at an eligible school. PLUS Loans are available through the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. Your parents can get either loan, but not both, for you during the same enrollment period. They also must have an acceptable credit history.
How do my parents get a loan?
For a Direct PLUS Loan, your parents must complete a Direct PLUS Loan application and promissory note, contained in a single form that you get from your school's financial aid office. For a FFEL PLUS Loan, your parents must complete and submit a PLUS Loan application, available from your school, lender, or your state guaranty agency. After the school completes its portion of the application, it must be sent to a lender for evaluation. Also, your parents generally will be required to pass a credit check. If your parents don't pass the credit check, they might still be able to receive a loan if someone, such as a relative or friend who is able to pass the credit check, agrees to endorse the loan. An endorser promises to repay the loan if your parents fail to do so. Your parents might also qualify for a loan without passing the credit check if they can demonstrate that extenuating circumstances exist. You and your parents must also meet other general eligibility requirements for federal student financial aid.
How much can my parents borrow?
The yearly limit on a PLUS Loan is equal to your cost of attendance minus any other financial aid you receive. If your cost of attendance is $6,000, for example, and you receive $4,000 in other financial aid, your parents can borrow up to $2,000.
Who gets my parents' loan money?
Either the U.S. Department of Education (for a Direct PLUS Loan) or your parents' lender (for a FFEL PLUS Loan) will send the loan funds to your school. Your school might require your parents to endorse a disbursement check and send it back to the school. In most cases, the loan will be disbursed in at least two installments, and no installment will be greater than half the loan amount. The funds will first be applied to your tuition, fees, room and board, and other school charges. If any loan funds remain, your parents will receive the amount as a check or in cash, unless they authorize the amount to be released to you or to be put into your school account. Any remaining loan funds must be used for your education expenses.
What's the interest rate?
For PLUS Loans disbursed on or after July 1, 2006, the interest rate is fixed (at 7.90 for Direct PLUS Loans and 8.50 percent for FFEL PLUS Loans). For PLUS Loans disbursed between July 1, 1998 and June 30, 2006, the interest rate is variable and is determined on July 1 of every year. For 2008-2009, the variable rate for these PLUS Loans (in both the Direct and FFEL programs) is 5.01percent. Interest is charged on a PLUS Loan from the date of the first disbursement until the loan is paid in full.
Other than interest, is there a charge to get a PLUS Loan?
Your parents will pay a fee of up to 4 percent of the loan, deducted proportionately each time a loan disbursement is made. For a FFEL PLUS Loan, a portion of this fee goes to the federal government, and a portion goes to the guaranty agency (the organization that administers the PLUS Loan Program in your state) to help reduce the cost of the loans. For a Direct PLUS Loan, the entire fee goes to the government to help reduce the cost of the loans. Also, your parents may be charged collection costs and late fees if they don’t make their loan payments when scheduled.
When do my parents begin repaying the loan?
For PLUS loans made to parents that are first disbursed on or after July 1, 2008, the borrower has the option of beginning repayment on the PLUS loan either 60 days after the loan is fully disbursed or wait until six months after the dependent student on whose behalf the parent borrowed ceases to be enrolled on at least a half-time basis.
How do my parents pay back these loans?
They'll repay a FFEL PLUS Loan to a private lender or loan servicer. They'll repay their Direct PLUS Loan to the U.S. Department of Education's Direct Loan Servicing Center. To read more about repayment options under both programs, read the PLUS Loans section in Funding Education Beyond High School: The Guide to Federal Student Aid.
Is it ever possible to postpone repayment of a PLUS Loan?
Yes, under certain circumstances, your parents can receive a deferment on their loans.
If they temporarily can't meet the repayment schedule, they can also receive forbearance on their loan, as long as it isn't in default. During forbearance, their payments are postponed or reduced. Generally, the conditions for eligibility and procedures for requesting a deferment or forbearance apply to both Stafford Loans and PLUS Loans. However, since all PLUS Loans are unsubsidized, your parents will be charged interest during periods of deferment or forbearance. If they don't pay the interest as it accrues, it will be capitalized (that is, added to the principal amount of the loan, and additional interest will be based on that higher amount).
Can a PLUS Loan be discharged (canceled)?
Yes, under certain conditions. A discharge (cancellation) releases your parents from all obligation to repay the loan. Your parents' PLUS Loan can't be canceled for these reasons: You didn't complete your program of study at your school (unless you couldn't complete the program for a valid reason? because the school closed, for example), you didn't like the school or the program of study, or you didn't obtain employment after completing the program of study.
For more information about loan discharge or repayment: If your parents have a Direct PLUS Loan, they should contact the Direct Loan Servicing Center at 1-800-848-0979, or go to www.dl.ed.gov. If they have a FFEL PLUS Loan, they should contact the lender or agency holding the loan
PLUS Loans for Graduate and Professional Degree Students
Graduate and professional degree students are now eligible to borrow under the PLUS Loan Program up to their cost of attendance minus other estimated financial assistance in both the FFEL and Direct Loan Program. The terms and conditions applicable to Parent PLUS Loans also apply to Graduate/Professional PLUS loans. These requirements include a determination that the applicant does not have an adverse credit history, repayment beginning on the date of the last disbursement of the loan, and a fixed interest rate of 8.5 percent in the FFEL program and 7.9 percent in the Direct Loan program.
Applicants for these loans are required to complete the Free Application for Federal Student Aid (FAFSA). They also must have applied for their annual loan maximum eligibility under the Federal Subsidized and Unsubsidized Stafford Loan Program before applying for a Graduate/Professional PLUS loan. Click here for more information about Direct PLUS Loans for graduate and professional degree students.
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