Student loans, unlike grants and work-study, are borrowed money and must be repaid, with interest, just like car loans and mortgages. Loans are legal obligations, so before you take out a student loan, think about the amount you’ll have to repay over the years.
Student loans are provided at low interest rates and are available to most students. You must complete the FAFSA (Free Application for Federal Student Aid) to determine which loans you qualify for. Depending upon the specific loan program, repayment may begin while the student is still enrolled, or after the student leaves school or drops below half-time enrollment.
Due to the signing of the Health Care and Education Reconciliation Act of 2010, Stafford and PLUS Loans will be through the William D. Ford Direct Lending (DL) Program. Under the Direct Loan Program, Stafford and PLUS Loan funds come directly from the U.S. Department of Education.
A subsidized loan is awarded on the basis of financial need. If you're eligible for a subsidized loan, the government will pay (subsidize) the interest on your loan while you're in school. Depending on your financial need, you may borrow subsidized money for an amount up to the annual loan borrowing limit for your level of study. For current interest rates, refer to the Federal Student Aid website.
Unlike a subsidized loan, you are responsible for the interest from the time the unsubsidized loan is disbursed until it is paid in full. You can choose to pay the interest or allow it to accrue (accumulate) and be capitalized (added to the principal amount of your loan). Capitalizing the interest will increase the amount you have to repay. For current interest rates, refer to the Federal Student Aid website.
The current loan origination fees can be found on the Federal Student Aid website. For first-time loan borrowers, you must complete Complete Entrance Loan Counseling and Loan Agreement for Subsidized/Unsubsidized Loans (MPN) at studentloans.gov.
Annual loan limits reflect the maximum combined borrowing from both the subsidized and unsubsidized programs. The annual grade-level loan limits are as follows:
- Freshman (0-29 earned credit hours): $5,500
- Sophomore (30-59 earned credit hours): $6,500
- Junior (60-89 earned credit hours): $7,500
- Senior (90-125 earned credit hours): $7,500
- Graduates: $20,500 or cost of attendance, whichever is higher
The combination of subsidized and unsubsidized loans cannot exceed the lifetime maximum of $31,000 for dependent undergraduates, $57,500 for independent undergraduates, and $138,500 for graduates.
Parent PLUS Loan
Parents can borrow a PLUS Loan to help pay their child’s educational expenses if they are a dependent undergraduate student enrolled at least half time in an eligible program at an eligible school. Parents must have an acceptable credit history. The first payment is due within 60 days after the loan is fully disbursed. There is no grace period for these loans. Interest begins to accumulate at the time the first disbursement is made. Parents must begin repaying both principal and interest while the student is in school. Through this program, parents may borrow each year up to the total cost of attendance minus all other financial aid. The current interest rate and loan origination fees on PLUS loans can be found on the Federal Student Aid website.
To apply for a Parent PLUS Loan, you will need to complete the online application and Master Promissory Note at studentloans.gov.
Parent PLUS Loans will be applied to student account balances before all other student loans. All tuition waivers, grants, and scholarships will be applied to the student account balances first. Parent PLUS Loans are applied next, followed by all other student loans.