Student loans

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What are my student loan options?

The most popular loan for higher education is the Federal Stafford Loan, a loan available to undergraduate and graduate students. The amount that may be borrowed each year is capped at levels well below the cost of most colleges. Loans made before July 1, 2006 are variable-rate, with the interest rate adjusted on July 1 each year based on the 90-day T-bill rate plus a margin of 1.7 percent or 2.3 percent depending on repayment status. Unsubsidized Stafford Loans (available to students regardless of financial need) first disbursed on or after July 1, 2006 are subject to a 6.8 percent fixed rate of interest. Subsidized Stafford Loans (available to students demonstrating financial need through the FAFSA filing) are interest-waived while the student is in school and for a grace period after graduation. The fixed interest rate for Subsidized Stafford Loans for the 2011-12 school year is 3.4% and for the 2012-13 school year is 6.8%.

The Federal PLUS Loan is made available to creditworthy parents of dependent undergraduate students. Like a Stafford Loan, a PLUS Loan made before July 1, 2006 is a variable-rate loan with interest reset every July 1, while a PLUS Loan first disbursed on or after July 1, 2006 is subject to a fixed rate of 7.9 percent or 8.5 percent depending on the source of the loan. A primary benefit of a PLUS Loan is that it can cover the full cost of education as reduced by Stafford Loans and other financial aid received by the student. Graduate and professional students became eligible for PLUS Loans as of July 1, 2006.

The Federal Perkins Loan is a 5-percent fixed-rate loan made directly by a school to the student using federal government funds. Schools may or may not decide to participate in the Perkins Loan program, and a school that does participate may run out of Perkins Loan funds before all requests are fulfilled. Unlike Stafford and PLUS Loans, a Perkins Loan is reserved for those students who can demonstrate financial need and schools may allocate the loans to those with the most need.

For more information on federal loan programs: http://studentaid.ed.gov/students/publications/student_guide/index.html

Most states have their own loan programs. Check with the higher education agency in your state to determine what is available. You can look for your state HERE.

Private education loans are other loans that banks and other lenders make available to families to help pay for college. They are not government-funded or government-guaranteed and typically carry higher interest rates than federal or state loan programs, although your credit history and income will significantly influence loan terms. Private loans offer more flexibility and do not require the submission of a FAFSA. A home equity line of credit is one type of private loan used by some families to provide funds for college, but they should not be confused with private education loans which are generally unsecured.