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Kelly Nichols '12
Major: Elementary Education, Integrated Liberal Studies
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- Paying For College
Paying For College
There are many loan options available to students who need to borrow money to pay for their education expenses. Some of the available loans do require a credit worthy co-signer (parent, family friend, grandparent, etc.) It's important to understand what loans are available to you, what organization(s) or institutions you are borrowing from along with the terms and conditions of each loan.
The majority of student loans are made either through the U.S. Department of Education (federal government) or through private lenders such as banks and credit unions. Some states also administer loan programs for their residents.
The U.S. Department of Education administers the William D. Ford Federal Direct Loan Program. Loans made through this program are referred to as Direct Loans and they include:
- Direct Subsidized Loan
- Direct Unsubsidized Loan
- Direct PLUS Loans (for parent borrowers)
Federal Direct Subsidized Loan
- Eligibility is determined by a college or university's Financial Aid Office based on financial need as demonstrated by the information provided on the Free Application for Federal Student Aid (FAFSA.) Eligibility is not based on student and/parents credit worthiness.
- Interest is subsidized by the federal government while a student is enrolled at least half-time.
- Loan amounts are capped by grade level.
- Repayment of these loans begins 6 months after the student ceases to be enrolled at least half-time (i.e. graduation, withdrawal, or leave of absence.)
- There is no pre-payment penalty.
Federal Direct Unsubsidized Loan
- Eligibility is determined by a college or university Financial Aid Office based on financial need as demonstrated by the information provided on the FAFSA. Eligibility is not based on student and/or parents creditworthiness.
- Interest accrues during the in-school period.
- Loan amounts are capped by grade level and dependency status.
- Repayment of these loans begins 6 months after a student ceases to be enrolled at least half-time (i.e. graduation, withdrawal, or leave of absence.)
- There is no pre-payment penalty.
- Interest may be paid during the in-school period, but it is not required.
Below are the annual and lifetime maximums for the Direct Subsidized and Unsubsidized Loan programs:
|Grade Level||Subsidized Maximum||Total Maximum (Sub. & Unsub.)|
|Junior & Senior||$5.500||$7.500|
|Grade Level||Subsidized Maximum||Total Maximum (Sub. & Unsub.)|
|Junior & Senior||$5,500||$12,500|
|Aggregate Limits||Subsidized Maximum||Total Maximum (Sub. & Unsub.)|
Federal Direct PLUS Loan
- A credit based loan available to the biological or adoptive parent(s) of dependent students.
- Parents can borrow up to the cost of education less other types of financial aid awarded.
- Interest and principal payments may be deferred during the student's in-school period.
- There is no pre-payment penalty.
- Student should maximize their eligibility for the Federal Subsidized and Unsubsidized Direct Loans prior to a parent applying for a Direct PLUS loan.
Students who need to borrow loans and are awarded a Federal Direct Subsidized and/or Federal Direct Unsubsidized Loan are strongly encouraged to borrow the maximum amounts they are eligible through these programs before seeking additional loan sources for themselves or parents to borrow. Federal loans usually have better interest rates and repayment terms than private/alternative loan offered through commercial lenders. Student federal loans also provide students with the ability to consolidate their loans at repayment time and they offer specific deferment and forbearance options for students experiencing financial hardships that may not be offered through the private loan programs.
For more information on the federal loan programs, please visit the National Student Loan Data System for Students.
Private/Alternative Education Loans
Private loans (also known as alternative loans) are credit based and income contingent loans that are offered by a number of commercial banks and credit unions throughout the country. These loans traditionally fill the gap once students have maximized what they are eligible through grants, scholarships, work programs and federal/state loans and a balance is still remaining. Students and their families should make sure a private loan is truly needed before beginning the application process.
Typically, a student is the primary applicant but because you are in-school, you usually need a credit-worthy, income earning co-signer to act as the co-applicant. Since private loans are credit based and income contingent , eligibility for these loans are determined on the applicant and in the majority of cases, the cosigner's, credit score, income flow each month, outstanding debt on other credit obligations (i.e. mortgages, credit cards, car loans, etc.) and payment history. Prior to applying you may want to review your credit history to make sure your credit report is accurately representing your credit history. You can access a copy of your credit report at www.annualcreditreport.com
Private loans traditionally have higher interest rates than federal loans. In some cases depending on the applicant(s) creditworthiness, the rates may be significantly higher. It is important that families who decide to borrow a private loan do their homework and compare the different loans that are available to them.
Below are questions that students and families should ask before committing to a private loan:
- What is the interest rate on my loan?
- Who is the primary applicant on my loan? Student or Parent?
- What is the maximum repayment term?
- Is there a pre-payment penalty should I pay the loan off early?
- Is the interest rate variable (subject to change during the year) or fixed for the term of the loan?
- What is the highest the interest rate could increase on my loan?
- When does interest start accruing on my loan?
- Are there origination and/or processing fees on my loan? If so, how much are the fees?
- What, if any, borrower benefits (i.e. reduced interest rate for on-time payments or making ACH payments) are available on my loan?
- What options are available to me should I have difficulties repaying my loan?
- When does repayment begin? Do I have to start making payments while I'm enrolled in school?
- Are interest payments required while I'm in school?
While there are many credible private lenders in the market today helping students finance their education, a private loan is a serious obligation that should be made with as much information as possible about the terms of the loan and your responsibilities as the borrower.
Enrolling in an interest free monthly payment plan is an excellent way to reduce what you may need to borrow to pay for your educational expenses. Payment plans are simple in that you determine how much you want to finance for the academic year and divide by ten (10). For example, if you wanted to finance $3,000, you would make 10 monthly payment of $300.
While most families aren't in the position to be able to finance their entire billed expenses utilizing a 10 month payment plan, many families develop a "combination strategy" utilizing what they have been awarded in grants and loans along with the payment plan in financing what is due.
Even a monthly payment of $100 can reduce what you need to borrow by $4,000 over 4 years of school. They are an excellent way to reduce the amount you may need to borrow and you pay no interest. We strongly encourage families to finance a portion of their education, no matter the amount through the payment plan administered for Curry College by Tuition Management Systems (TMS.) For more information on the payment plan, please visit the TMS website.
As we have previously stated, borrowing any type of loan to finance your education is a serious financial obligation and should be made with much thought.
When deciding to borrow, it's important to consider the following:
- Borrow only what is needed to pay your bill. It can be tempting to borrow above what is needed to satisfy your billed expenses, however this can lead to thousands of extra dollars being paid in principal and interest in repayment.
- Borrow the maximum you are eligible for through the federal loan programs. The federal loan programs offer the best interest rates and flexibility in repayment.
- Look for ways to minimize what you need to borrow. Is an interest free payment plan an option based on on your monthly disposable income? Even a $100 payment translates to borrowing $1,000 less per year. Over 4 years of school you have reduced your borrowing by $4,000.
- Pay the interest that is accruing on your Federal Unsubsidized Direct Loan and private loans during the in-school period. While most loan programs do not require this payment to be made, this strategy can save you thousands of dollars in repayment.
- If a private loan is needed, make sure you have "shopped" the different programs available to you assuring that you have secured the best interest rate and repayment based on your credit history and your needs.
Federal Loan Programs
The Federal Direct Subsidized and Unsubsidized Loans require you to begin repaying your obligation 6 months after you have ceased to be enrolled at least half-time. The Department of Education has a number of loan repayment programs that you may be eligible for in order to assist you in paying back your loans. To find out more information go to www.studentloan.gov.
During the 6 month period prior to entering repayment, it is important to get your financial matters organized and begin thinking how you will manage your monthly loan payment. This is an excellent time to develop a budget based on your income and anticipated expenses such as your loan payment, rent and other debt obligations. Below are some helpful websites that can assist you with developing a budget and managing your finances:
If you are unable to make your scheduled payment it is important that you be in contact with your loan servicer to see what other options may be available to you. Based on your financial circumstances you may be eligible for a deferment or forbearance. Your loan servicer will be able to work with you and determine your eligibility for these options.
For more information on repayment, please visit the National Student Loan Data System for Students.
How Much Have I Borrowed in Student Loans?
Your cumulative borrowing for your federal loans is tracked by the federal government. You can review your federal student loan debt by logging in to the National Student Loan Data System for Students (NSLDS).
You will need your FAFSA PIN number to view your cumulative debt. If you've misplaced your PIN you can request a duplicate by going to www.pin.ed.gov.
What If I'm Having Trouble Repaying My Student Loans?
If you are having trouble meeting your monthly repayment obligation, don't delay or avoid seeking a resolution. If you skip making payments you risk going in to loan default which is a serious matter that could impact your credit score, future earnings and future purchasing ability.
If you default, it means you failed to make payments on your student loan according to the terms of your promissory note, the binding legal document you signed at the time you took out your loan. In other words, you failed to make your loan payments as scheduled. Your school, the financial institution that made or owns your loan, your loan guarantor, and the federal government all can take action to recover the money you owe. Here are some consequences of default:
- National credit bureaus can be notified of your default, which will harm your credit rating, making it hard to buy a car or a house.
- You will be ineligible for additional federal student aid if you decide to return to school.
- Loan payments can be deducted from your paycheck.
- State and federal income tax refunds can be withheld and applied toward the amount you owe.
- You will have to pay late fees and collection costs on top of what you already owe.
- You can be sued.
As soon as you recognize you are having difficulties meeting your obligations, contact the Department of Education.
Direct Loan Borrowers
Phone: (800) 848-0979 or (315) 738-6634
Fax: (800) 848-0984
TDD: (800) 848-0983
Or go to the Direct Loan Servicing website
Resolve questions about:
- Your loan
- Address/name changes
- Repayment estimates
- Repayment plan changes
- Deferment and forbearance forms
Direct Consolidation Loans
Phone: (800) 557-7392
Fax: (800) 557-7396
TDD: (800) 557-7395
Or go to the Direct Loan Consolidation website
Private Loan Programs
The majority of private loan programs allow students the option to defer payment while they are enrolled in school at least half-time. It is important to understand the terms of repayment as some programs provide an option to make immediate repayment which will lower the amount of interest that accrues during the in-school period. In addition, most private loan lenders provide incentives for making payments on-time. These incentives may include:
- Decrease in the interest rate after a set number of on-time payments
- Decrease in the interest rate for making payments through auto-debit
- Co-signer release after a set number of on-time payments
Just like the federal loan programs, it is important that you are in contact with your lender if at anytime you are unable to make your scheduled loan payment. There may be options available to you to reduce your payment or extend your repayment schedule. It is very important not to miss any scheduled payments.