Student
Financial Aid - Student Loans
Education loans give college
students flexibility to choose the type of school that is
right
for them. Since federal funds for education are limited, only a relatively
small
number of students would potentially receive financial aid,
limiting educational and
economic opportunity. By giving almost
all students access to education loans, and
allowing them to
defer repayment while in school, the government and private lenders
encourage students to manage their own education decisions and give
more people
access to a college degree. There are two broad
categories of student loans, loans
based on financial need and
loans not based on financial need.
Student Loans Based on
Financial Need: The federal government is the
principal provider of
need-based loan funds. Your award letter
will list the type and amount of need-based loans.
Need-based
loans usually share three distinct features: Low Interest Rates, Delayed
Repayment
and In-School Interest Subsidy. Typical need-based
loans are Perkins loans, subsidized Stafford
loans, and Direct
loans.
Perkins Loan:
If you've been awarded a
Perkins Loan, the Financial Aid Office sends a promissory
note
that must be signed and returned. Since the college already has been given
its Perkins funds,
it simply transfers the loan to your student
account as a credit against charges.
Subsidized
Stafford Loan: For a Subsidized Stafford Loan,
the aid office will ask you to choose a
lender from a list they
provide. Many lenders now offer online loan applications. Once you
complete
the loan application (a master promissory note) and the
loan is approved, the money is sent by the
lender to your
school.
Subsidized Direct
Loans: Direct loans work
the same way as a Stafford except that the federal
government is
the lender.
Student Loans Not Based on
Financial Need: The three main types of
non-need-based loans are
unsubsidized Stafford or unsubsidized
Direct Loans for students, PLUS Loans for parents, and
private
loans, for students or parents.
Unsubsidized
Stafford or Direct Loans: You must file a
FAFSA before applying for an Unsubsidized
Stafford Loan. The
Student Aid Report (SAR) will show if your family has need. If so, you can
take out
a subsidized loan and save money on interest
payments
PLUS
Loans: This is a parent
loan, sponsored by the federal government that is unrelated to need.
Generally, parents can borrow up to the total cost of education,
minus any aid received.
Private or Alternative Loans:
Private education loans are
available to both parents and students,
usually at higher
interest rates than the federal loans described above. In almost all
cases, a credit
check and approval is
required.
