Student Loan Information

Unfortunately, the costs of education continue to rise. Although the costs of education today are ten times what they were less than 40 years ago, there are more types of financial aid available today to students than there ever has been. Financial aid, as the name suggests, is money that students get from scholarships, Federal and private lenders and a few other sources, to aid students in paying for education.

It used to be that students could depend almost entirely on Pell Grants and Stafford Loans to finance education costs, if not complete living expenses. Pell Grants are still given, but they're need-based and represent a small percentage of the education cost today. For information on Pell Grants, see our page on College Pell Grants. Stafford Loans are also need-based, and can range from 25%-40% of the average cost of financing school. Perkins Loans are similar, but reserved for the lowest income families.

The most common programs for students remain the unsubsidized and subsidized Stafford Loans. Subsidized loans are the most desirable, since the government pays the interest while the student is in school. But they are need-based. Unsubsidized loans are not need-based, making them available to a much wider group of students.

A detailed breakdown of what can be borrowed by who is available at: http://studentaid.ed.gov/PORTALSWebApp/students/english/studentloans.jsp or http://www.salliemae.com/content/get_student_loan/find_student_loan/smart-option-student-loan.aspx

Though Federal loan programs, like the subsidized Stafford and others, carry no credit check and low fees and interest is paid by the government, they are not the only source of financial aid today.

The average financial aid package today will be a complex mixture of grants, scholarships (if possible), Federal and (probably) private loans. Rates range from 5% (Perkins) to the more common 6.8% or higher. With the recent large increase in defaults on sub-prime lending (mostly for mortgages), lenders are going to be more strict than before about credit history and income.

The best way to get started is to look at tables of the most common loan programs, what interest rates and fees they carry along with any eligibility requirements. One excellent site that summarizes much of that information can be found at http://www.finaid.org/.

What about Loans for Graduate Students?

Graduate students, on the other hand, often have fewer options for scholarships and grants just at the time when tuition costs jump. But teaching and/or research assistantships usually more than make up the shortfall. They, in effect, have very low-paying (and very long hour) jobs while attending courses and doing research.

Recently a new option has become available to graduate students: PLUS loans. Though the acronym stands for Parent Loans for Undergraduate Students, they are now an option for many grad students. In the undergraduate case, parents are the borrower and are responsible for repayment. In the case of grad students, they become the responsible party.

PLUS loans have one distinct advantages. First, they're available. Since they're based on credit quality, not need-based, most borrowers can qualify. However, current interest rates for PLUS loans are not low by historical standards. Rates are either 7.9% or 8.5%, depending on the specific type. Even at the lower rate, on $10,000 borrowed the first year interest amount is over $750 and payments start within 60 days of when the funds are disbursed with no grace period.

Caps on undergraduate and graduate loans, for all non-private loans, differ as well. Even the maximum amount over the lifetime of the program varies between undergraduates and graduates.

For more info on PLUS loans for graduate students, please go to

http://studentaid.ed.gov/PORTALSWebApp/students/english/PlusLoansGradProfstudents.jsp

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