Loans

Student loans, unlike grants and work-study, are borrowed money that must be repaid, with interest, just like car loans and home mortgages. You cannot have these loans canceled because you didn't like the education you received, didn't get a job in your field of study or because you're having financial difficulty. Loans are legal obligations, so before you take out a student loan, think about the amount you'll have to repay over the years. Your Federal Student Loans: Learn the Basics and Manage Your Debt can help you learn more about federal student loan debt. You can find this publication at www.FederalStudentAid.ed.gov.

Types of loans:

• Federal Perkins Loans are:
• Made through participating schools to undergraduate, graduate and professional degree students.



• Offered to students who demonstrate financial need.



• Made to students enrolled full-time or part-time.



• Repaid to your school.
• Stafford Loans are for undergraduate, graduate and professional degree students. You must be enrolled as at least a half-time* student to be eligible for a Stafford Loan. There are two types of Stafford Loans: subsidized and unsubsidized. You must have financial need to receive a subsidized Stafford Loan. The U.S. Department of Education will pay (subsidize) the interest that accrues on subsidized Stafford Loans during certain periods. Financial need is not a requirement to obtain an unsubsidized Stafford Loan. You are responsible for paying the interest that accrues on unsubsidized Stafford Loans.



• PLUS Loans (Direct or FFEL) are loans parents can obtain to help pay the cost of education for their dependent undergraduate children. In addition, graduate and professional degree students may obtain PLUS Loans to help pay for their own education.



• Consolidation Loans (Direct or FFEL) allow student or parent borrowers to combine multiple federal education loans into one loan with one monthly payment. (See page 43 for more information on these loans.)

These loans are made through one of two U.S. Department of Education programs:

William D. Ford Federal Direct Loan (Direct Loan) Program

Loans made through this program are referred to as Direct Loans. Eligible students and parents borrow directly from the U.S. Department of Education at participating schools. Direct Loans include subsidized and unsubsidized Direct Stafford Loans (also known as Direct Subsidized Loans and Direct Unsubsidized Loans), Direct PLUS Loans, and Direct Consolidation Loans. You repay these loans directly to us.

Federal Family Education Loan (FFEL) Program

Loans made through this program are referred to as FFEL Loans. Private lenders provide funds that are guaranteed by the federal government. FFEL Loans include subsidized and unsubsidized FFEL Stafford Loans, FFEL PLUS Loans and FFEL Consolidation Loans. You repay these loans to the bank or private lender that made you the loan.

Whether you (or your parents) receive a Stafford or PLUS Loan depends on which program the school you attend participates in. Most schools participate in one or the other, although some schools participate in both.

It’s possible for you to receive both Direct and FFEL Loans but you can’t receive the same type of Direct or FFEL Loan for the same period of enrollment at the same school. Some schools use one loan program for Stafford Loans and another loan program for PLUS Loans. For example, a graduate or professional student could receive a Direct Stafford Loan and a FFEL PLUS Loan for the same period of enrollment at the same school.

What’s the interest rate on these loans?

For loans first disbursed on or after July 1, 2008, the interest is 6.0 percent for subsidized* Stafford loans for undergraduate students and 6.8 percent for unsubsidized* Stafford loans for undergraduate and graduate students.

FFEL PLUS Loans first disbursed on or after July 1, 2006 have a fixed interest rate of 8.5 percent. Direct PLUS Loans first disbursed on or after July 1, 2006 have a fixed interest rate of 7.9 percent.

Over a four-year period beginning July 1, 2008, the interest rate on subsidized Stafford loans made to undergraduate students, with a first disbursement date on or after July 1, 2008, will be reduced as shown in the following chart:

Interest Rate Reductions for Subsidized Stafford loans

This change does not affect any prior loans made to these or any other borrowers, the terms and interest rates of those prior loans remain unchanged. These reduced interest rates apply only to subsidized loans made to undergraduate students; any unsubsidized Stafford Loan for the same undergraduate borrower would continue to be made at 6.8 percent. Graduate students have a fixed interest rate of 6.8 percent.

What are the differences in these loan programs?

The chart below shows basic loan comparisons. More information is provided in this section. The financial aid office at your school can explain which programs are available to you.

How do I apply for a Perkins or Stafford Loan?

As with all federal student aid, you apply for a Perkins or Stafford Loan by completing the FAFSA. A separate loan application is not required. However, you’ll need to sign a promissory note,* which is a binding legal contract that says you agree to repay your loan according to the terms of the promissory note.* Read this note carefully before signing it and save a copy for your records.

DID YOU KNOW … The value of a postsecondary education as a credential for future employment and earnings is expected to rise. About 90 percent of the fastest growing jobs in the new knowledge-driven market economy require some postsecondary education.

Student Loan Comparison Chart

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Loan Program	Eligibility	Award Amounts	Interest Rates	Lender/Length of Repayment
Federal Perkins Loans	Undergraduate and graduate students	Undergraduate—up to $5,500 a year (maximum of $27,500 as an undergraduate) Graduate—up to $8,000 a year (maximum of $60,000, including undergraduate loans) Amount actually received depends on financial need, amount of other aid, availability of funds at school	5 percent	Lender is your school Repay your school or its agent Up to 10 years to repay, depending on amount owed
FFEL Stafford Loans (subsidized and unsubsidized)	Undergraduate and graduate students; must be enrolled at least half-time	Depends on grade level in school and dependency status (see "Maximum Annual Loan Limits Chart—Subsidized and Unsubsidized Direct and FFEL Stafford Loans" chart) Financial need is required for subsidized loans Financial need not necessary for unsubsidized loans	Fixed rate of 6.0 percent for subsidized loans and 6.8 percent for unsubsidized loans made to undergraduate students Graduate students have a 6.8 percent fixed interest rate The federal government pays interest on subsidized loans during school and certain other periods The borrower pays all interest on unsubsidized loans	Lender is a bank, credit union or other participating private lender Repay the loan holder or its agent Between 10 and 25 years to repay, depending on amount owed and type of repayment plan selected
Direct Stafford Loans (subsidized and unsubsidized)	Same as above	Same as above	Same as above	Lender is the U.S. Department of Education; repay Department Between 10 and 25 years to repay, depending on amount owed and type of repayment plan selected
FFEL PLUS Loans	Parents of dependent undergraduate students enrolled at least half-time (see dependency status) Graduate or professional degree students enrolled at least half-time Borrower must not have negative credit history	Student’s cost of attendance - Other aid student receives _________________________ = Maximum loan amount	Fixed rate at 8.5 percent for loans first disbursed on or after July 1, 2006; borrower pays all interest	Same as for FFEL Stafford Loans above
Direct PLUS Loans	Same as above	Same as above	Fixed rate at 7.9 percent for loans first disbursed on or after July 1, 2006; borrower pays all interest	Same as for Direct Stafford Loans above, except that Income Contingent Repayment Plan is not an option