Student Loan FAQs

Type of Borrower

Undergraduate Students

What are the different types of student loans for undergraduate students?
There are three types of student loans for undergraduate students.

Federal Perkins Loans:

• Fixed 5% interest rate.
• Maximum award of $4,000 per undergraduate year.
• School-awarded.
• Very limited availability.

Federal Stafford Loans:

• Are usually borrowed through private lenders.
• You must be enrolled at least half-time.
• Interest rate is fixed at 6.8% for unsubsidized Stafford loans; 5.6% for subsidized Stafford loans for the 2009-2010 academic year.
• Award limits are based on your year in school and your dependency status.
• Repayment normally starts six months after leaving school (or attending less than half-time).
• There are two types of Stafford Loans - subsidized (for which you must demonstrate financial need and the interest is paid by the federal government while you are in school) and unsubsidized (which is not based on need, but you are responsible for all the interest that accrues).

Private Loans:

• Are borrowed through private entities, banks, credit unions or lending companies
• Interest rates can vary
• Can borrow up to the total cost of attendance, less other financial aid
• Interest can be capitalized more often (meaning, added to the loan principal), increasing the amount of money you ultimately are charged for borrowing.
• Approval and terms for private loans are based on credit history. If your rating is bad or non-existent, you might need a co-signer to qualify. Poor or minimal credit may also result in a higher interest rate on your loan.

How do I tell the difference between student loans?
There are many different kinds of student loans. First, know the difference between federal and private student loans. You should always use federal loans first. They carry lower, fixed interest rates and often have better terms than private (or alternative) loans. Second, know the difference between the types of loans in your financial aid award.

• Subsidized Stafford Loans: a federal loan for which the government pays interest while you are in school
• Unsubsidized Stafford Loans: a federal loan for which you pay interest while you are in school
• PLUS loans: federal loans for graduate students and parents of undergraduate students
• Private loans: loans from banks or other non-government sources

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 than government or federal loans. You should also know your credit score. The lower your score, the higher your rate will likely be on a private loan. If you are an undergraduate student, you will almost definitely need a co-signer to be approved for a private loan. Fees and penalties can be higher with private loans than with government-backed, or federal loans, and your repayment terms may not be as favorable.

When choosing a student loan, investigate your options carefully. Consider the following:

• Total cost of the loan (after all of the interest and fees have accumulated)
• APR, or annual percentage rate, and fees
• Borrower benefits (such as cash back or interest rate reductions if you make payments on time)
• Deferment options

Do I need a co-signer for a student loan?
For federal student loans, such as Perkins or Stafford, you do not need a co-signer. For private student loans, you should apply with a credit-worthy co-signer to increase your chances of approval and possibly improve the rate and fees you are offered. Some lenders require you to apply with a co-signer regardless of your income or credit rating. You'll need to look at each loan program for these requirements. Applying with a co-signer may also help you receive a lower interest rate and better terms on your loan offer.

Most lenders will require a borrower to have a strong credit score (good to excellent) in addition to other criteria such as no negative credit history (such as missed payments), debt-to-income ratio (amount of debt vs. your current income) and even proof of current employment and income.

So, if you are an undergraduate student without sufficient personal income or credit history, you'll almost certainly need to apply for a private student loan with a credit-worthy co-signer.

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.

How do I apply for a student loan?
Use the student loan comparison tools on SimpleTuition to shop around for the loan that’s right for you. Compare rates, monthly payment, total cost of loan, borrower benefits and more. When you have decided on a loan, either click on “apply” to be taken to the online application, or click on “call” to see a phone number where you can call to apply over the phone. The approval and processing of applications varies greatly from lender to lender, so it is difficult to say how long it will take. Some lenders offer e-signature, which will allow you to complete the process online and receive your funds faster. In order to complete an application for a student loan with most lenders, you will need the following information:

• Your full name, social security number and date of birth
• Your permanent address and the number of years you have lived there (no P.O. boxes)
• The amount of your monthly rent or house payment
• Your home phone number
• Your current occupation and position
• The name of your employer and how long you have been employed by them
• The business phone number of your employer
• Your gross annual income
• The contact information for a reference (name, address, home/business phone number)
• The name of your school (or the school the student for whom the loan is for is attending)
• The social security number, contact information and employment information for your co-signer (if applicable)

Some banks will send or express mail the necessary documents to you to complete the loan. As with federal student loans, you will be required to sign (or e-sign) a promissory note whereby you agree to accept the terms of the loan (rates, fees, APR, and repayment) and then repay it.