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Student Loans 101
- 1. STUDENT LOANS 101 What everystudent and parent needs to know about funding higher education.
- 2. AVERAGE YEARLY COST:TUITION, FEES, ROOM AND BOARD (in current dollars) 1983 — Public Institution: $3,433 2013 — Public Institution: $18,110 1983 — Private Institution: $7,759 2013 — Private Institution: $36,589 (National Center for Education Statistics) The Good News Is: You have loan options to ease the financial burden.
- 3. STUDENT LOAN OPTIONS:THE BIG PICTURE There are six (6) types of loans that can be used, some in combination, to whittle down the cost of college tuition and other educational expenses. 1. Direct Subsidized (Stafford) Loans 2. Direct Unsubsidized (Stafford) Loans 3. Perkins Loans 4. PLUS Loans 5. State Student Loans 6. Private Student Loans
- 4. 1. DIRECT SUBSIDIZED(STAFFORD) LOANS • Available for undergraduate students • The U.S. Department of Education pays some of the interest • Maximum eligibility period is six (6) years • Maximum loan amount is limited Pros • Low, fixed interest rate • Flexible repayment options • No credit check to qualify • U.S. Department of Education pays some loan interest Cons • Must demonstrate financial need • Available to undergraduates only • Low loan limits — e.g., $5,500 for the first year • Loan use limited to tuition, books and housing • Federal filing required (through a FAFSA application)
- 5. 2. DIRECT UNSUBSIDIZED(STAFFORD) LOANS • Available for undergraduate and graduate students • You are responsible for paying all loan interest • Maximum eligibility is 3 years • Maximum loan amount is limited Pros • No requirement to show financial need • Low, fixed interest rate • Payments can be deferred until after graduation Cons • You are responsible for all interest payments • Maximum loan amounts are limited based on grade level and type of student
- 6. 3. PERKINS LOANS •Available for undergraduate and graduate students • Based on financial need • Loans made by and repaid to the school • Maximum load amount is limited Pros • Helps students with exceptional financial need • Low, fixed interest rate • Available to undergraduate, graduate and professional students • Available to full-time and part- time students Cons • Not all schools participate in the Federal Perkins Loan Program • Loan amount limited to $5,500 per year for undergraduates • Loan amount limited to $8,000 per year for graduate students • Funds limited, so you must apply early
- 7. 4. PLUS LOANS •Available for graduate and professional students • Lender is U.S. Department of Education • Can borrow up to the full cost of educational expenses • Cannot have an adverse credit history Pros • Low, fixed interest rate • Can borrow up to the total cost of education • Available to undergraduates, graduate students and professional students • Flexible repayment options Cons • Creditworthiness is a factor • Loan fees are assessed • Parent cannot transfer loan repayment responsibility to the child
- 8. 5. STATE STUDENTLOANS • Useful for supplemental funding • Loan terms vary from state to state Pros • Helpful for supplementary financial aid • Some loans offer excellent repayment terms • Some types of loans are readily available Cons • Less flexibility for repayment • Interest rates may be higher
- 9. 6. PRIVATE STUDENTLOANS • Useful for supplemental/gap funding • Loan terms vary depending on the lender Pros • Loans can cover the total Cost of Attendance (COA) • Interest rates may be lower, depending on credit worthiness • Application process easier Cons • Creditworthiness is a factor • Interest rates usually variable • Borrowers may not be able to defer repayment
- 10. NEXT STEPS Start investigatingyour options as soon as possible. The earlier you gather the facts, map out your strategy and start the application process, the more likely you are to obtain the loan(s) you need. Investigate loan options with: • The school • The school’s state • U.S. Department of Education • Private lenders This presentation was brought to you by TextbookRush, your online campus bookstore.