Students who need to borrow to pay for college should first do their research on the types of loans available, including federal and private.
Direct Stafford Loans
These government-backed loans do not have to be repaid until six months after the student leaves school. To be eligible for them the student needs to be enrolled at least half-time and they need to complete the online FAFSA (Free Application for Federal Student Aid) form. These loans have a fixed interest rate and minimal origination fee.
There are two types of Stafford Loans:
- Subsidized loans do not accrue interest while the student is enrolled in college at least half-time. A student’s eligibility for subsidized loan funds is determined by financial need.
- Unsubsidized loans accrue interest as soon as they are taken out, even while the student is still enrolled in college. These loan funds are not based on financial need.
When taking out a Stafford Loan, students are required to complete the Master Promissory Note and the Entrance Loan Counseling. This process can be done at the Federal Student Aid website. The process only takes a few minutes to complete, but will provide you with valuable information regarding your rights and responsibilities when borrowing a student loan, loan repayment options, deferment and forbearance possibilities.
Direct Parent PLUS Loans
Parent PLUS loan is a loan applied for by a parent. It is subject to a credit check, but not a debt-to-income ratio. Parents can borrow up to the cost of attendance minus any financial aid awarded. The Parent PLUS Loan has an fixed interest rate and an origination fee. The PLUS loan goes into repayment 60 days after the first disbursement, however families can request a deferment. To access and apply for the Parent Plus Loan visit: www.studentloans.gov.
If the parent is declined the Parent Plus loan, then the student is eligible for an additional Unsubsidized loan. They can receive up to $4,000 if the student is a freshman or a sophomore and $5,000 if the student is a junior or a senior.
Alternative Student Loans
Private loans are offered by different lending institutions and are applied for by the student with a credit-worthy co-signer. They require a credit check and in many instances a debt-to-income ratio check as well. Fees vary and interest rates vary and are tiered, based on credit. Please visit www.elmselect.com for a list of lenders.
