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What Types of Loans Are Available?
There are three major categories of student loans: federal student loans (e.g., Stafford, Perkins, and Grad PLUS loans), parent loans (e.g., traditional PLUS loans) and private student loans (also known as alternative student loans). You can also have a consolidation loan which locks in a "blended" interest rate of all your student loans combined. Beware that you can only consolidate the same type of loan together. You can consolidate all your federal loans together or all your private loans together, but not mixing of the two.
Federal Student Loans
The majority of students attending an accredited post-secondary institution within the U.S. qualify for government loans, known as Stafford loans. They come in two types: subsidized and unsubsidized. Both categories accrue interest on the principal, however the federal government pays that interest on subsidized Stafford loans while they are in deferment. Unsubsidized Stafford loans accrue interest from the disbursement date, and that is the borrower's responsibility to pay. For all types of Stafford loans, there exists an annual maximum borrowing amount as well as a lifetime maximum.
Beginning in 2007, the annual loan limits were increased:
Federal law sets the maximum interest rates and fees that lenders may charge for federally-guaranteed loans. The interest rate on the Stafford Loan for new loans first disbursed after July 1, 2006 is a fixed rate of 6.8%. The same rate applies to the in-school, grace and repayment periods. Nothing prevents a lender from charging lower fees, however. In fact, many lenders offer a variety of student loan discounts to attract borrowers. They may waive origination fees on Stafford loans, offer an interest rate reduction in exchange for monthly direct debit payments from a bank account, and/or offer additional discounts for making all monthly payments on time (although said payments usually must be consecutive and commence immediately once the loan enters repayment).
PLUS Grad and PLUS Parent Loans
PLUS Loans are available through the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. These are additional loans for the parents of undergraduate students, graduate/professional students or the parents of graduate/professional students. The interest rate on new PLUS Loans disbursed after July 1, 2006 is a fixed interest rate of 8.5%in the FFEL program and 7.9% in the Direct Loan program. These loans have different terms than Stafford or Perkins loans. A borrower must: not have any adverse credit (generally referring to delinquencies greater than 90 days past due), be be a United States citizen, and not currently be in default of any federally-guaranteed loan.
Applicants for all federal loan programs are required to complete the Free Application for Federal Student Aid (FAFSA). They also must have applied "maxed out" their annual loan eligibility under the Stafford loan program before applying for a Graduate/Professional PLUS loan. Each borrower (parent or eligible graduate and professional degree student) may borrow up to the cost of attendance (determined by the school) minus other financial aid received. This will help bridge the gap between Stafford loans and the cost of attendance.
For more information on exact amounts, visit the Federal Student Aid Stafford/Plus Information page that shows the maximum loan amounts for various PLUS borrowers. Be warned though! PLUS loans add a fee of 4% of the total loan amount.
Private Loans
Most students also have to borrow funds in addition to the federal Stafford loans from private lenders. These are commonly known as alternative loans. Try to borrow as little as possible from alternative loans, because these loans typically have a higher rate of interest and are credit-based loans. This means that the better your credit is, the cheaper it will be for you to borrow. If you don't have good credit, youll end up with a higher interest rate or you'll need a co-borrower to sign along with you in order for you to borrow the money. Of course, this means that this loan will be listed on your co-borrower's credit history until it's paid off, and may prohibit your co-borrower from receiving credit. This person is also responsible for paying back this loan if you default, die, or become permanently disabled. Another word of caution with alternative loans, beware that many are variable interest rates. This can be important if you will need to defer your loans during internship/residency and if you have to borrow a high amount of alternative loans. If you can find a lender that will offer a fixed rate (rare) or will allow you to consolidation rate at a fixed rate after graduation, do it. Some lenders are better than others in alternative funding so make sure to do your homework.
Several lenders also offer student loans customized for the needs of health professional students so make sure to check all of your options a good resource is http://financialaid.org.
There are three major categories of student loans: federal student loans (e.g., Stafford, Perkins, and Grad PLUS loans), parent loans (e.g., traditional PLUS loans) and private student loans (also known as alternative student loans). You can also have a consolidation loan which locks in a "blended" interest rate of all your student loans combined. Beware that you can only consolidate the same type of loan together. You can consolidate all your federal loans together or all your private loans together, but not mixing of the two.
Federal Student Loans
The majority of students attending an accredited post-secondary institution within the U.S. qualify for government loans, known as Stafford loans. They come in two types: subsidized and unsubsidized. Both categories accrue interest on the principal, however the federal government pays that interest on subsidized Stafford loans while they are in deferment. Unsubsidized Stafford loans accrue interest from the disbursement date, and that is the borrower's responsibility to pay. For all types of Stafford loans, there exists an annual maximum borrowing amount as well as a lifetime maximum.
Beginning in 2007, the annual loan limits were increased:
- Dependent Freshman - $3,500
- Independent Freshman - $7,500 (maximum $3500 subsidized)
- Dependent Sophomore - $4,500
- Independent Sophomore - $8,500 (maximum $4500 subsidized)
- Dependent Junior/Senior - $5,500
- Independent Junior/Senior - $10,500 (maximum $5500 subsidized)
- Graduate/Professional* - $20,500 (maximum $8500 subsidized)
- Medical - $40,500 (maximum $8500 subsidized)
- Dependent undergraduate - $23,000
- Independent undergraduate - $46,000 (maximum $23,000 subsidized)
- Graduate/Professional - $138,500 (maximum $65,500 subsidized)
- Medical - $189,125 (maximum $65,500 subsidized) Maximum loan amounts vary for disciplines, so check with your financial aid office or prospective lender.
Federal law sets the maximum interest rates and fees that lenders may charge for federally-guaranteed loans. The interest rate on the Stafford Loan for new loans first disbursed after July 1, 2006 is a fixed rate of 6.8%. The same rate applies to the in-school, grace and repayment periods. Nothing prevents a lender from charging lower fees, however. In fact, many lenders offer a variety of student loan discounts to attract borrowers. They may waive origination fees on Stafford loans, offer an interest rate reduction in exchange for monthly direct debit payments from a bank account, and/or offer additional discounts for making all monthly payments on time (although said payments usually must be consecutive and commence immediately once the loan enters repayment).
PLUS Grad and PLUS Parent Loans
PLUS Loans are available through the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. These are additional loans for the parents of undergraduate students, graduate/professional students or the parents of graduate/professional students. The interest rate on new PLUS Loans disbursed after July 1, 2006 is a fixed interest rate of 8.5%in the FFEL program and 7.9% in the Direct Loan program. These loans have different terms than Stafford or Perkins loans. A borrower must: not have any adverse credit (generally referring to delinquencies greater than 90 days past due), be be a United States citizen, and not currently be in default of any federally-guaranteed loan.
Applicants for all federal loan programs are required to complete the Free Application for Federal Student Aid (FAFSA). They also must have applied "maxed out" their annual loan eligibility under the Stafford loan program before applying for a Graduate/Professional PLUS loan. Each borrower (parent or eligible graduate and professional degree student) may borrow up to the cost of attendance (determined by the school) minus other financial aid received. This will help bridge the gap between Stafford loans and the cost of attendance.
For more information on exact amounts, visit the Federal Student Aid Stafford/Plus Information page that shows the maximum loan amounts for various PLUS borrowers. Be warned though! PLUS loans add a fee of 4% of the total loan amount.
Private Loans
Most students also have to borrow funds in addition to the federal Stafford loans from private lenders. These are commonly known as alternative loans. Try to borrow as little as possible from alternative loans, because these loans typically have a higher rate of interest and are credit-based loans. This means that the better your credit is, the cheaper it will be for you to borrow. If you don't have good credit, youll end up with a higher interest rate or you'll need a co-borrower to sign along with you in order for you to borrow the money. Of course, this means that this loan will be listed on your co-borrower's credit history until it's paid off, and may prohibit your co-borrower from receiving credit. This person is also responsible for paying back this loan if you default, die, or become permanently disabled. Another word of caution with alternative loans, beware that many are variable interest rates. This can be important if you will need to defer your loans during internship/residency and if you have to borrow a high amount of alternative loans. If you can find a lender that will offer a fixed rate (rare) or will allow you to consolidation rate at a fixed rate after graduation, do it. Some lenders are better than others in alternative funding so make sure to do your homework.
Several lenders also offer student loans customized for the needs of health professional students so make sure to check all of your options a good resource is http://financialaid.org.
