Student Loan FAQs

Federal Student Loans

Why is a federal student loan better than a private student loan?
Federal student loans are guaranteed and regulated by the U.S. government and have fixed interest rates that are lower than most private student loans. Unlike private student loans, most federal student loans do not require a credit check. Private student loans are not subsidized by the government, and therefore are not regulated as closely. They may have variable interest rates and fees that are based on the credit profile of the borrower and the borrower’s co-signer. Borrowers should always maximize their federal loan options before using private loans.

How do I choose the right student loan for me?
You have many options when it comes to student loans for higher education. A few things to keep in mind:

• Fill out the Free Application for Federal Student Aid (or FAFSA). Without it, you won’t have access to federal student loans – many of which are not based on need or your income.
• Always use federal loans first, such as the Perkins, Stafford, and PLUS loans. They carry lower, fixed interest rates and often have more favorable terms than private (or alternative) loans.
• If you need to use private loans, consider all of the costs. Private loans can have origination fees, different ways of compounding interest, and higher interest rates or APRs.
• Know your credit score. The lower your score, the higher your rate will likely be on a private loan. Most student borrowers will need a credit-worthy co-signer to be approved for a private student loan. Most private loans have variable interest rates (meaning they will fluctuate over time), while government-backed (or federal) loans have fixed interest rates and more lenient repayment terms.

Investigate your loan options carefully by considering the following:

• Total cost of the loan (after all of the interest and fees are taken into account)
• APR or annual percentage rate
• Borrower benefits (such as cash back or interest rate reductions for making on-time payments)
• Monthly payment
• Deferment options

How much can I borrow in federal student loans?
It depends on the type of federal student loan. Here are the 2009-10 borrowing limits for the most common types of federal student loans by year.

Freshman:

• Stafford - Dependent Students: $5,500
• Stafford - Independent Students: $9,500
• Perkins: $4,000
• PLUS and Graduate PLUS: Up to the total cost of attendance, less aid received

Sophomore:

• Stafford - Dependent Students: $6,500
• Stafford - Independent Students: $10,500
• Perkins: $4,000
• PLUS and Graduate PLUS: Up to the total cost of attendance, less aid received

Junior/Senior:

• Stafford - Dependent Students: $7,500
• Stafford - Independent Students: $12,500
• Perkins: $4,000
• PLUS and Graduate PLUS: Up to the total cost of attendance, less aid received

Undergraduate Cumulative Limit:

• Stafford - Dependent Students: $23,000
• Stafford - Independent Students: $23,000
• Perkins: $20,000
• PLUS and Graduate PLUS: Up to the total cost of attendance, less aid received

Graduate Students**:

• Stafford - Dependent Students: $20,500*
• Stafford - Independent Students: $20,500*
• Perkins: $6,000
• PLUS and Graduate PLUS: Up to the total cost of attendance, less aid received

Cumulative Limit (Undergraduate + Graduate):

• Stafford - Dependent Students: $65,500
• Stafford - Independent Students: $65,500
• Perkins: $40,000
• PLUS and Graduate PLUS: Up to the total cost of attendance, less aid received

Note: These limits are based on a full academic year and your qualifications as a full or part-time student.

* Only $8,500 of this amount can be subsidized

**Higher Stafford loan amounts are available to students in many graduate medical programs.

How much can I borrow in Stafford Loans?
The amount of money you can borrow depends on your year in school and whether you are classified as an independent or dependent student. 2009-10 borrowing limits are listed below:

	Freshman	Sophomore	Junior or Senior	Undergraduate Cumulative Limit	Graduate Students	Cumulative Limit (Undergraduate + Graduate)
Stafford - Dependent Students	5,500	6,500	7,500	23,000	20,500*	65,500
Stafford - Independent Students	9,500	10,500	12,500	23,000	20,500*	65,500

Note: These limits are based on a full academic year and your qualifications as a full or part-time student. Rates are effective as of July 1, 2009.
* Higher Stafford loan limits are available to students in some graduate medical programs.

What is a PLUS Loan?
The Parent Loan for Undergraduate Students, or PLUS, is a low-interest federally backed loan that parents can take out on behalf of their undergraduate children to pay for educational costs.

Should I choose GradPLUS or a private loan?
You might want to choose a private loan if:

• You are comfortable with the possibility of interest rates increasing beyond the interest rate cap of the GradPLUS loan
• You have top-tier credit - at this point in time, these borrowers will presently be charged less interest, but if interest rates continue to climb, this benefit decreases or disappears altogether
• You believe that there is very little possibility that you may use the deferment or forbearance options
• You plan to only borrow the loan for a short time

You might want to choose a GradPLUS loan if:

• You like the certainty that a fixed-rate loan provides
• If your credit is good, fair, or poor, your cost will likely be lower
• You like the protection that the greater deferment and forbearance options provide
• The repayment incentives offered may bring the repayment interest rate cost to less than 8.50%

I'm in a certificate or continuing education program, not a graduate program. Can I use a GradPLUS loan?
You must be enrolled at least half-time in a graduate or professional program leading to a master’s degree (or law, medical, or other professional degree) to be eligible to borrow a GradPLUS loan. For non-degree granting programs, you may want to consider a continuing education loan.

I'm only in school part-time. Can I get a student loan?
Yes. Federal student loans, such as the Stafford Loan, and many private student loans are available for students enrolled half-time at qualified institutions. If you are enrolled less than half-time, you may be eligible for a continuing education loan or other financial aid programs from your college or university. Talk with your financial aid administrator to learn about more options.