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.
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