Student Loans to Cover the Cost of Education

Loans to Cover the Cost of Attendance

There are three categories of loans available to pay for college costs: student loans, parent loans, and private student loans. All three types of these loans MUST be paid back, even if you leave school before getting a degree. All of these loans have maximum interest rates and fees that are set by the federal government. All loans can be consolidated into a consolidation loan. To simplify the loan paperwork and payment process, a consolidation loan combines all of your education loans into one.

Student loans are provided by the federal government and have low interest rates. These types of loan are provided to students and do not require a credit check. Student loans include Stafford Loans and Perkins loans. Stafford loans have two subcategories of loans including: Federal Family Education Loan Program (FFELP) and Federal Direct Student Loan Program (FDSLP). Private lenders, including banks, credit unions, and even savings and loan groups can provide a Federal Family Education Loan Program loan to students. The federal government guarantees these loans. On the other hand, Federal Direct Student Loan Program loans are provided by the US Government and disbursed by particular schools. These two programs are very similar, the only difference being the SOURCE of money, either banks or the US Government. Each college and university determines which program they will participate in, either FFELP or FDSLP. Eastern Illinois University participates in the FDSLP program, whereas, Lake Land College (only 10 miles away) participates in the FFELP program.

Stafford loans can also be categorized two ways. There are subsidized loans and unsubsidized loans. A subsidized loan is one where the government pays the interest on the loan while you are in school. An unsubsidized loan is one where the student must pay all the interest, but students can have the payments deferred until after graduation. Subsidized loans are provided based on need, while unsubsidized loans are provided to all students, regardless of need. Some student though, will be able to receive both loans to borrow the maximum amount possible.

Stafford loans do have amount limits based on student standing. For undergraduates who are freshman, the maximum amount that can be borrowed is $3500, sophomores have a maximum of $4500, and a maximum of $5500 for all other years. These loan limits are much higher for graduate students, up to $20,500 each year.

Repayment for Stafford loans begins 6 months after graduation or at any time that a student drops down below half time. There are several repayment programs available to accommodate many different situations.

The other type of student loan is the Federal Perkins Loan. The Federal Perkins Loan is awarded to students, both undergraduate and graduate, that demonstrate an exceptional financial need. These loans are campus-based programs where the school is basically the lender. This loan is a pretty good deal because it is a subsidized loan and there are no origination or guarantee fees. The Perkins Loan has an interest rate of 5% and has a 10-year repayment plan.

Perkins loans also have amount limits based on student standing. For undergraduates, the maximum amount limit is $4000 and for graduates, that amount is $6000.