Maryland Student Loans
Around 43% of the 14,763 students attending Maryland colleges and universities graduated in 2010 after four years of attendance, per College Completion. A large number of them couldn’t have reached their ultimate goal without the help of financial aid, including:
- Work-study programs
- Student loans
While all of these components make for an ideal college experience, and scholarships and grants are certainly favorable due to not having to pay anything back, student loans are a necessary component of college life in today’s world for the vast majority of hopeful grads. In 2011, CNN Money notes around two-thirds of all graduating students had used student loans to further their education. The following year, 21,945,597 people submitted a FAFSA for 2011-2012 school year, as noted by Forbes Magazine. With each passing year, college costs rise and so does the number of people asking for help to pay for it.
Maryland students have some advantages when it comes to financial aid and college prospects. First and foremost, they’ve got their pick of schools, such as the University of Maryland at College Park and Johns Hopkins University. Residents of the state not only benefit from gaining access to priority admissions and in-state tuition for such stellar schools, but they also have great picks like Georgetown University in nearby Washington, DC, which offers the same tuition to out-of-state residents as it does to in-state.
Maryland universities continue to churn out successful graduates every year. In fact, Johns Hopkins reports their school as having an 85% graduation rate in 2008. In addition, unemployment is pretty low in the state of Maryland, holding steady at a rate of 5.5 percent, superior to the national rate of unemployment, per the Maryland State Department of Labor, Licensing and Regulation.
Maryland Student Loan Options
Students attending Maryland schools can pick from both federal and private student loans. If you’re enrolled on an out-of-state basis, the money you receive won’t go quite as far as it would for an in-state student. Fortunately, most every school considers you to be an in-state student after one year of residency, so any student who ends up paying the extra tuition only generally does so for one year. The typical year at the University of Maryland as an in-state student will run you around $9,427, whereas out-of-state is significantly more at $29,720. There are certain steps you can take prior to signing on the dotted line of any student loan note that can aid in saving you money in the long run. They include:
- Only borrowing enough to cover college expenses and nothing else
- Paying on the interest you’re accruing during your enrollment
- Using all funds from work-study programs, grants, and scholarships prior to seeking federal loans
- Exhausting all federal loan options before turning to private loans as a source for funding
Private loans will always be the most costly option when it comes to financial aid. In the long run, you will end up paying far more in interest and won’t have the added benefits that federal loans come with, such as subsidized interest on some loans and fixed rates. Additionally, most private loans don’t allow for any sort of cancellation or forgiveness option. If you’re planning to enter a career field that is in demand, such as teaching or nursing, it is wise to check into potential forgiveness options and lean toward a loan that will allow forgiveness of all or part of your loan balance in exchange for years worked in the field.
Federal Direct Loans
Direct Loans are the most commonly utilized student loan of all. Subsidized loans are available to those who can demonstrate financial need, and they come with the added plus of having all interest paid by the federal government while you’re in school. So essentially, you start out interest-free with this loan at the beginning of the repayment period. That being said, unsubsidized Direct Loans do not offer this bonus, but they’re still highly preferable to other loan options. You’re looking at a current interest rate of 5.05% for either, and graduate students pay more interest at 6.60%.
There are borrowing limits on these loans, too. The unsubsidized version allows graduate students to borrow up to $20,500 per year, maxing out at up to $138,500 in all. On a lower scale, subsidized limits span from $5,500 to $12,500 per year. As soon as you drop below part-time status or graduate, your six-month grace period kicks in. At the end of such, you can expect the bills to start rolling in for repayment.
Federal Perkins Loan
Funding for the Perkins Loan varies from one school to the next. Likewise, not every school participates in the Perkins Loan Program either. The U.S. Department of Education estimated 493,244 Perkins loans being rendered in 2011. Before you lock yourself into the idea that you’re going this route, it would be best to confirm that your college or university handles Perkins Loans. Some of the benefits of the Perkins Loan include:
- A low 5% interest rate that will never vary
- The ability to qualify based on financial need, thereby beating out applicants who have other funding options
- Government-subsidized interest during your enrollment period
- A nine-month long grace period before the repayment period begins
Federal Direct PLUS Loans
This loan is strictly dedicated to those who are pursuing graduate or professional degrees. Prior to being granted one of these loans, all other funding must be applied to your school tuition balance. That means any grants, scholarships, or other funding that you’ll be using to help pay for school are deducted from your bill beforehand. Then, you may qualify for one of these loans. Unlike a Direct or Perkins Loan, Federal Direct PLUS Loans do require good credit, though some students can qualify if they have no credit history at all — a common experience among college-aged individuals.
Interest rates are somewhat greater for these loans, holding steady at 7.60%, and you get no grace period, because you’re expected to begin paying on your debt while you’re still a student. That’s right — the repayment period is initiated as soon as the final disbursement has been paid. This can be problematic for many students who aren’t yet employed despite being in graduate school. This is especially true for those who won’t reach their full employment potential without said degree, such as medical professionals or attorneys.
If you find yourself unable to make payments on your PLUS Loan, you do have options, and defaulting shouldn’t be one of them. Forbes Magazine states that 13.7% of all students who started paying on their federal student loan debt in 2011 were in default by 2014. One of the first routes you can take to avoid such is applying for a deferment. The approval process for this is generally pretty quick, and you can get a postponement on your payments for often up to a year or longer. Deferments may be granted in lieu of enough income to make payments or because the student is attending graduate or professional school on a half-time or more basis.
There are also PLUS Loans specifically designated for parents to borrow funding for their children’s education. All of the same rules apply except that parents can reap the perks of having an added grace period of six months after their child graduates or drops below half-time status. Regardless of any deferment or forbearance placed on either loan, interest keeps stacking up in the meantime while payments are postponed. You will be required to pay on the interest even during deferment or forbearance.
Paying It Back
The Old Line State boasts some of the nation’s most admirable campuses and curriculum. One common misconception many borrowers make is assuming student loans have little to do with their credit report. Just because you can secure many of these loans without your credit being involved doesn’t mean your credit won’t be harmed if you can’t pay. Trust that going into default will damage your credit score, and it’s a lot easier to drag your credit down than it is to bring it back up.
U.S. News notes that the typical college student now graduates with around $30,000 in student loan debt. After adding interest accrued over the years, you’re likely looking at a monthly payment of $300 or more. This is a lot of money for the new grad who is just starting out. Even with the six- to nine-month grace period some loans offer, coming up with the extra money when you’re at the bottom of the career ladder isn’t as easy as many think it will be.
Remember that the federal government does work in your interest when it comes to getting your loans repaid. Those with some income can opt for repayment plans that take such into consideration, basing monthly payments around what the borrower is bringing in rather than what the owed balance is. Some of these plans are structured and only change annually if your income does, while others may increase as your income does over a period of two decades or longer. The great part about it is that you have these choices and can decide, armed with the right information, what is best for your financial future.
Forgive and Forget?
Can you forget about your student loans? Sometimes. Forgiveness plans aren’t easy to come by, but they do exist. Certain individuals who are employed in fields presenting employment shortages have a greater chance of loan forgiveness. These plans aren’t something you can apply for and receive overnight. Rather, when the borrower pays on their loans in a timely manner for a certain length of time while working in the designated field, they can apply for partial or total forgiveness of the balance that is remaining on their loans. Generally, when approved, a certain percentage of the balance will be paid off by the government with each passing year. There is never a lump sum down payment that clears all of your debt. In the spring of 2014, MSNBC reported over 1.3 million students being in the forgiveness program, along with a combined $72 billion in student loan debt.
Maryland’s biggest forgiveness program is for teachers who commit to working in low-income schools; this program is available through the federal government for those who meet strict qualifications. Another state-based program — the Janet L. Hoffman Maryland Loan Repayment Program for Teachers — aims to forgive a maximum of $30,000 over three years for teachers who work full-time, earned their degree at a Maryland school, and aren’t in default.
Applying for a Student Loan in Maryland
If you’re applying for federal loans, you must complete a FAFSA. Most students who submit the FAFSA do it over the internet. When you sit down to fill out your FAFSA, make sure you’re prepared with investment records, tax returns, W-2s, and any other qualifying income information. Single individuals who are under the age of 25 are generally considered to be dependents of their parents, but read the requirements carefully to determine your own status.