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  Education Loans
Education Loans are self-help aid that is borrowed money and it must be repaid. Many students will borrow money to finance a portion of their education, whenever their scholarships, grants, family contribution, and/or work-study does not cover the full cost of attending a particular school. Education loans are offered through a variety of sources such as: the federal government, state government, institutions, employers, private lenders, banks, credit unions, and family members.

There are four kinds of education loans:
Student Loans
Parent Loans (PLUS)
Consolidation Loans
Private Loans (Alternative Loans)

Student Loans
Most students rely on the federal government to help finance their education through the federal Student Financial Assistance (SFA) Programs. To be eligible to apply for one or more federal loans, you must be a student enrolled in school at least half-time, meet certain restrictions, and complete the FAFSA (link). Remember, you must submit the Free Application Federal Student Aid each year to be eligible to apply for the federal loan programs.

There are two major loan programs offered by the Federal government:
Federal Perkins Loan
A Federal Perkins Loan is a low-interest (currently 5% -- the lowest of any educational loan program) loan for undergraduate and graduate students, enrolled at least half-time in a degree program, with exceptional financial need. These funds are awarded on a first-come basis to qualified applicants. Your school is the lender and the loan is funded by the government with a portion contributed by your school. You must repay this loan to your school.

The interest on the Perkins Loan is subsidized which does not accrue while you are enrolled in school. Repayment of this loan begins nine months after you graduate, leave school, or drop below half-time enrollment status. Under certain conditions, repayment can sometimes be further deferred, or even cancelled. For example, all or part of your loan may be canceled if you teach in certain areas, become a nurse or medical technician, work in certain law enforcement fields or for child or family service agencies, or serve as a full-time volunteer in specific programs (such as the Peace Corps). You may also be able to defer repayment if you resume your studies on at least a half-time basis.

For more detailed information about Federal Perkins Loan, please visit the Department of Education Web site.

Federal Stafford Loan
Federal Stafford Loans are low-interest rate (currently capped at 8.25 percent) loans available to undergraduate and graduate students enrolled at least half time. These loans funded directly by the federal government.

There are two types of Federal Stafford Loans:
Subsidized Stafford Loans are awarded on the basis of financial need. With subsidized loans, the federal government pays the interest (subsidizes) on the loan while the student is in school, during a grace period after the student graduates or leaves school, and during any authorized deferment periods (but not during the repayment period).
Unsubsidized Stafford Loans are not based on need -- borrowers do not have to demonstrate financial need. With unsubsidized loans, the borrower is responsible for interest payments from the time the loan is disbursed. In most cases, the principal and interest can be deferred while the student is in school -- but the interest is capitalized.

You can receive a Subsidized and Unsubsidized Stafford loan for the same enrollment period. Some students combine both loans to borrow the maximum loan amount permitted each year. Repayment of a Stafford Loan begins six months after you graduate, leave school, or drop below half-time enrollment status. Repayment of your loan(s) may be deferred or forbearance for certain reasons without a penalty.

Stafford Loans are administered by both the:
Federal Family Education Loan Program (FFEL)
FFEL funds are provided by private lenders such as: banks, credit unions and savings and loan institutions. Your school’s financial aid office or state’s education agency should have a list of participating lenders.
Federal Direct Student Loan Program (FDSL)
FDSL funds are provided by the U.S. government directly to you and your parents through your school.

Many of the terms and conditions (the interest rate, loan maximums, deferments, and cancellation benefits) for both programs are similar. The major differences are: the source of the loan funds, some aspects of the application process, and available repayment plans. The FDSL and FFEL programs also offer Parent Loans (PLUS) and Consolidation Loans.

For more detailed information about Federal Stafford Loans, visit the Department of Education website.

Parent Loans (PLUS)
The Federal PLUS (Parent Loan for Undergraduate Students) is a simple low-interest rate (capped at 9%) loan for parents of dependent undergraduate students (link) enrolled at least half time in school. This loan is funded directly by the federal government, which is not based on financial need. PLUS Loans are available through both the Direct Loan and FFEL programs. The interest rate on a PLUS loan is variable (capped at 9%) and is adjusted each year, normally in July. Interest is charged on the loan from the first date of disbursement until the loan is paid in full. Your parent(s) can borrow up to the total cost of attendance minus the financial aid awarded to you in your financial award letter.

For example:    
Cost of Attendance:   $12,000
Financial Aid Awarded to you is: - $8,000
Your parent(s) can borrow up to: = $4,000

To be eligible to receive a PLUS Loan, your parents generally will be required to pass a credit check. If they are denied a PLUS loan due to their credit report, they may be able to receive a loan if someone, such as a relative or friend who is able to pass the credit check, agrees to endorse the loan and promise to repay the loan, if your parents should fail to do so. Your parents may also qualify for a loan without passing a credit check, if they can demonstrate that extenuating circumstances exist.

Your parent(s) is responsible for repaying the loan. Repayment begins 60 days after the final loan disbursement for the academic year, which is based on a ten-year repayment plan. There is not a grace period for these loans. Your parents must begin repaying both the principal and interest while you are enrolled in school.

For more detailed information about PLUS Loans, visit the Department of Education website.

Consolidation Loans
A Consolidation Loan is a fixed low interest-rate, federal government-guaranteed, no collateral loan. This loan is designed to help student and parent borrowers simplify loan repayment by allowing the borrower to consolidate several types of federal student loans with various lenders and repayment schedules into one loan from a single lender. A Consolidation Loan simplifies the repayment process because you make only one monthly payment.

Once you consolidate your student loans, the interest rate is the weighted average of all your loans being consolidated rounded up to the nearest 1/8th percent. The interest rate will never be higher than 8.25%. Consolidation Loans are available through both the Federal Direct Loan program and the Federal Family education Loan program (FEEL).

A Consolidation Loan will allow you to:
Lower your monthly payments up to 50 - 60%
Extend your repayment period
Offer various repayment options
Repay your loan early with no penalties (if you decide to accelerate your payment schedule)
Lock in a low fixed interest rate for the life of the loan
Consolidate for free - with no fees and no credit check for approval
Make a convenient single monthly payment to a single lender
Consolidate your spouse’s loan with your loan.

For more detailed information about Consolidation Loan, visit the Department of Education website.

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How financial aid is awarded


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