It’s important to understand the differences among all of your college loan options. This presentation provides guidance on comparing interest rates, calculating total loan cost, and what to read in the fine print.

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Planning, Saving & Paying for College
Comparing College Loan Options

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• The Fine Print
• Key Terms
• Tiered Pricing
• Interest Rates
• Wise Borrowing Tips
• MEFA vs. PLUS
• Connect with Us
An Overview

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•Review Application and Solicitation Disclosure Statements
– Found on lender websites and loan comparison tools
– Provide loan details
•Questions to learn the answers to when comparing college loans:
– Do I know the interest rate before applying?
– What are the fees?
– What will be my total loan cost over the life of the loan?
Read the Fine Print
Familiarize
yourself with
the terms of
the loan

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Key Term: Annual Percentage Rate (APR)
• Single percentage number
• Rate charged to consumers for borrowing funds
• Represents total annual cost of the loan
• Considers interest rate, fees, & repayment term
• Quick way to compare loan options

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• Signs the loan agreement along with primary and/or student borrower
• Has equal responsibility for loan repayment
• May increase chances for approval
• Those with good credit may help decrease the interest rate
• May be released from the loan after a certain number of on-time payments
for certain loans
Key Term: Co-Borrower

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• Specifies time period that borrower has for loan repayment
• Denotes when repayment begins
• Has a direct impact on total loan cost
• Selected by borrowers during loan application process
Key Term: Repayment Term

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Some lenders use tiered pricing, which means:
•The interest rate is based on credit score and your risk to the lender
•You may not know the interest rate before you apply
•The advertised rate may not be the rate you receive
Be Informed About Tiered Pricing

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• Fixed Rate vs. Variable Rate
• Transparency: Are the rates posted up front?
• If the rate is variable, is there a limit on how high the rate can go?
• Rate may be based on repayment option chosen
What to Consider in the Interest Rate

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• Borrow the Federal Direct Student Loan first
– Available by submitting the FAFSA
– Annual limit for freshman year: $5,500
• Minimize Borrowing
– Use available savings
– Enroll in the college’s interest-free monthly payment plan
• Know your total loan cost
– Use MEFA’s Loan Payment Calculator
• Get advice from trusted resources
– Speak with the college financial aid office
– Reach out to customer service representatives at MEFA
Wise Borrowing Tips

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MEFA and PLUS Loan Comparison
MEFA Loan Direct PLUS Loan
Interest Rate
Starting at 4.99% (APR 6.13% – 6.51%)
fixed interest rate 6.84% fixed interest rate
Fee
4% origination fee added to loan
amount
4.292% origination fee deducted from
loan amount
Student on loan? Yes No
Responsibility to repay
Student and parent or other credit-
worthy co-borrower share responsibility
Parent or custodial step-parent is
borrower
Can responsibility be
transferred?
Yes, with the Student Deferred Loan
option No
Credit criteria
Minimum credit score based on
repayment option Minimal standards
Repayment terms 10 - 15 years 10 - 25 years
Repayment options
Immediate, Interest-Only, and Deferred
Repayment Immediate and Deferred Repayment
Enrollment status At least half-time At least half-time
Consumer safeguards
Student death and disability loan
forgiveness
Parent death and disability loan
forgiveness
Requires filing of FAFSA No Yes
*The Annual Percentage Rate (APR) reflects both the accruing interest and the effect of borrowing the origination fee and paying
the expected monthly payment over the term of the loan. APR varies with length of deferral, length of the Anticipated In-School
Period, and the presence of a co-borrower.

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MEFA is here to help you.
To learn more, join our community at
mefa.org.
(800) 449-MEFA (6332)
Connect With Us