Loans have to be repaid-even if you don’t finish school!

Student loans, unlike grants and work-study, are borrowed money that must be repaid, with interest, just like a car loan. You cannot cancel this loan because you didn’t like the education you received, quit in the middle, or didn’t get a good job after school. There are several types of loans that are available:

  • Federal Perkins Loans
  • Stafford Loans
  • PLUS Loans
  • Consolidation Loans
  • Private Loans
FEDERAL PERKINS LOANS

Perkins loans are made through colleges and universities to students who have financial need. The maximum loan is $4,000 a year. The interest rate is 5%.

You can apply for a Perkins loan when you COMPLETE AND SUBMIT YOUR FAFSA. The loan may be part of the financial aid package offered to you by the college.

Schools have a certain amount of Perkins money to loan to students each year. When it is gone, you are out of luck. This is another reason to COMPLETE AND SUBMIT YOUR FAFSA early.

You will have to sign a promissory note that outlines the terms of the loan. You will also be required to participate in “entrance counseling.”

STAFFORD LOANS

There are two types of Stafford Loans:

Subsidized: You must have financial need and be enrolled at least half-time. The federal government pays the interest while you are in school.
Unsubsidized: You must be enrolled at least half-time. You don’t have to show financial need. You pay interest while you are in school.

The interest rate on a Stafford loan is a low fixed rate. The amount you may receive depends on what year you are in school and whether you are an independent or dependent student.

You will have to sign a promissory note that outlines the terms of the loan. You will also be required to participate in "entrance counseling."

PLUS LOANS

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. The maximum amount of this loan is calculated by subtracting all of your aid from the cost of attendance. The interest rate varies and is determined on July 1 of every year. The interest is not subsidized.

CONSOLIDATION LOANS

Consolidation loans allow you or your parents to combine multiple federal education loans into one loan with one monthly payment.

PRIVATE LOANS

When taking out a bank loan:

  • Read all the documents (yes - it’s a lot!)
  • Find out the essentials: monthly payment, interest rate, and years to repay.
  • Ask about any terms you don’t understand.
  • Ask if there is a repayment grace period. Do you have to pay the loan while you are in school?
  • Find out if the interest is fixed or variable. "Fixed" means that it will not change. "Variable" means that it may go up or down depending on some other rate.
  • Ask about late fees.
  • Don’t let anyone rush you. This is a big decision.
FOR MORE INFORMATION

College Student Loans
www.federalstudentaid.ed.gov
www.studentaid.ed.gov
The Guide to Federal Student Aid
Student Loans at www.finaid.org