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    federal student loans

    Posted : July 7, 2001
    Last Updated : July 1, 2015
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    federal student loans

    Federal Direct Loans are loans for students and parents to help pay for the cost of a student's education after high school. The lender is the U.S. Department of Education. The money you borrow must be used for any school costs including tuition, fees, books, supplies, or room and board. Here are the types of loans available through the Federal Direct Loan Program.

    Federal Subsidized Stafford Loans
    Federal Subsidized Stafford loans are low interest loans for students enrolled at least half-time as an undergraduate student in an eligible institution. These loans are available to those who qualify based on need or income. "Subsidized" means that the federal government will pay interest (up to 150% of program length) on your loan. Once you reach the 150% limit, you become ineligible for the interest subsidy benefits on all Federal Subsidized loans disbursed to you on or after July 1, 2013.

    Federal Unsubsidized Stafford Loans
    Unlike Federal Subsidized Stafford loans, Unsubsidized Stafford loans are not based on need or income. Students and families of all income levels have access to federal guaranteed loans for college. The terms for this loan are similar to the Subsidized Stafford, but interest begins accruing from the day the loan is made.

    Federal PLUS Loan
    Federal PLUS loans (Parent Loan for Undergraduate Students) are also available for your educational costs if you are enrolled at least half time at an eligible institution, but the loan is made to your parents. Eligibility is not based on need or income, but parents must not have an adverse credit history. A parent may borrow up to the cost of education less any other financial aid awarded with repayment beginning within 60 days of loan disbursement.

    GradPLUS Loan
    Effective for loans certified by the educational institution on or after July 1, 2006, a graduate student or professional student may borrow a Federal PLUS loan. With benefits similar to the traditional PLUS loan for parents, the graduate student PLUS loan program (Grad PLUS) allows graduate students or professional students to borrow up to the cost of education at a particular institution minus any other financial aid. The Grad PLUS loan is meant to fill the gap between your financial aid package and the cost of education - your school must determine your Federal Stafford loan eligibility before you apply for a PLUS loan for graduate students. With the graduate student PLUS loan, the student is the borrower and not the parent.

    Consolidation Loan
    There may be advantages to consolidating (combining) your federal student loans into one loan, starting with the convenience of making a single monthly payment. Consolidation generally extends the repayment period, resulting in a lower monthly payment. This may make it easier for you to repay your loans. However, you will pay more interest if you extend your repayment period through consolidation since you will be making payments for a longer period of time. Contact the Direct Loan Consolidation Center for more information at 1-800-557-7392.
     

    Federal Student Loan Comparison Chart (Effective July 1, 2015)
    Please note: In July 2013, both houses of Congress passed a bill that links student loan interest rates to the financial markets. The bill establishes a formula for student loan rates based on the interest rate on 10-year Treasury notes, so the rates will fluctuate with the market. For now, this legislation offers lower rates for most students. If the economy improves as expected, the interest rates will be higher in future years. However, interest rates will be capped at 8.25% for undergraduate students, 9.5% for graduate students, and 10.5% for PLUS borrowers. For the 2015-2016 school year, undergraduates will be able to borrow at 4.29%, graduate students at 5.84%, and PLUS borrowers at 6.84%.

      Subsidized Stafford Loan Unsubsidized Stafford Loan PLUS/GradPLUS Loans
    Borrower Dependent or independent student Dependent or independent student Parents of dependent undergraduate students AND graduate/professional students borrowing for themselves
    Interest Rates Undergraduate student
    - 4.29% fixed rate

    Note: As of July 1, 2012, subsidized loans are no longer available to graduate or professional students.

    Undergraduate student
    - 4.29% fixed rate

    Graduate student
    - 5.84% fixed rate

    6.84% fixed rate
    Eligibility Based on financial need No income restrictions No income restrictions
    In-School Interest Paid by federal government Paid by student borrower* Borrower responsibility
    Grace Period Interest paid by federal government during six-month grace period. Interest paid by borrower during six-month grace period No grace period - parent borrower may request a forbearance while student is enrolled AND graduate/professional student may defer payments while enrolled
    Repayment Terms
    • Repayment begins after grace period
    • $50 minimum monthly payment
    • 10-25 year maximum repayment term (based on total loan balance)
    • Repayment begins after grace period
    • $50 minimum monthly payment
    • 10-25 year maximum repayment term (based on total loan balance)
    • 1st payment due within 60 days after loan is fully disbursed
    • $50 minimum monthly payment
    • 10-25 year maximum repayment term (based on total loan balance)

    * Borrower has option of making interest payments while in school or waiting until repayment. Interest not paid during school will be capitalized one time at end of grace period.

    Please reference studentaid.ed.gov for further information regarding interest rates.

    Federal Subsidized and Unsubsidized Stafford Loan Limits (Effective July 1, 2015)

      Dependent Students
    (except students whose parents cannot borrow a PLUS loan)
    Independent Students
    (and students whose parents cannot borrow a PLUS loan)
    Graduate and Professional Students
    1st year $5,500
    Maximum of $3,500 in subsidized loans
    $9,500
    Maximum of $3,500 in subsidized loans
    $20,500
    Maximum of $8,500 in subsidized loans. Note: As of July 1, 2012, subsidized loans are no longer available to graduate and professional students.
    2nd year $6,500
    Maximum of $4,500 in subsidized loans
    $10,500
    Maximum of $4,500 in subsidized loans
    same as above
    3rd-5th
    (years each)
    $7,500
    Maximum of $5,500 in subsidized loans
    $12,500
    Maximum of $5,500 in subsidized loans
    same as above
    Maximum total Stafford debt upon graduation $31,000
    Maximum of $23,000 in subsidized loans
    $57,500
    Maximum of $23,000 in subsidized loans
    $138,500
    Maximum of $65,500 in subsidized loans. Note: As of July 1, 2012, subsidized loans are no longer available to graduate and professional students.

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