Loans for College
These days, the majority of students graduate from college with some form of debt.
It is unlikely that
grants
and
scholarships
will pay for all of your college expenses. Luckily, there are several loan programs
that can help you pay the remaining balance. It is important that you understand
each of your options.
Federal Loans
Federal loans have more favorable repayment terms and interest rates. They also
have the most favorable deferment and forbearance options. Federal student loan
programs include the Stafford Subsidized Loan, Stafford Unsubsidized Loan, and Perkins
Loan. For these programs, the student is the borrower and responsible for repaying
the loan. The Parent Loan for Undergraduate Students (PLUS) Loan is a federal parent
loan and is available to parents of dependent undergraduates. For this program,
the parent is the borrower and responsible for repaying the loan.
Here is a brief summary of the federal loan programs:
|
Loan Program
|
Eligibility Requirements
|
Annual Loan Limits
|
Stafford Loan
(Subsidized
and
Unsubsidized)
|
Available to students who demonstrate financial need and who are enrolled at least
half-time
|
Dependent Students
- First year: $5,500 (as much as $3,500 may be subsidized)
- Second year: $6,500 (as much as $4,500 may be subsidized)
- Third year and beyond: $7,500 (as much as $5,500 may be subsidized)
Independent Students
- First year: $9,500 (as much as $3,500 may be subsidized)
- Second year: $10,500 (as much as $4,500 may be subsidized)
- Third year and beyond: $12,500 (as much as $5,500 may be subsidized)
|
|
Perkins Loan
|
Available to students who demonstrate financial need
|
As much as $4,000
|
|
PLUS Loan
|
Available to parents of dependent undergraduates and to independent students earning
a graduate or professional degree
|
As much as the cost of attendance after other financial aid has been applied
|
State Loans
Depending on which state you live in, you may be eligible for state-based student
loans. As with federal loans, state loans have lower interest rates and repayment
terms than private loans do. Five states currently offer loan programs, and each
has its own terms and conditions. They are Minnesota, Texas, New Jersey, Alaska,
and Hawaii. For more information about state loans,
click here.
Private Loans
If you are unable to secure a federal or state loan, or if you need additional funds
to pay for your college expenses, consider a private student loan from a trusted
bank or other financial institution. Private loans usually require borrowers to
pass a credit check or have a creditworthy cosigner.
Credit Cards
You can also pay for college expenses with a credit card, but their interest rates
are usually far higher than those that governments or banks will charge you. They
should be used as a last resort.
Selecting the best loan can be a challenge. Of the federal, state, and private student
loans, which type is best for you? Check out the
loan comparison worksheet
from StudentAid.com. You can use this tool to help you learn about the different
types of loans and how to select the best one for you.