4 Credit qualifications Private loans –most lenders will require a credit check Federal Stafford loan –not required Federal PLUS loan –credit check required –all approved borrowers receive same interest rate, regardless of credit rating
5 Interest rates Private loans –interest rates vary based on market conditions, borrower’s credit, lender Federal Stafford loan –fixed at 6.8% Federal PLUS loan –fixed at 8.5% (FFEL) or 7.9% (Direct)
6 Repayment options Private loans –vary by lender –may not have a grace period Federal Stafford loan –several choices (standard, extended, graduated, and income-sensitive) –grace period Stafford: six months PLUS: no grace period
7 Hardship assistance Private loans –differ by lender Federal Stafford and PLUS loans –deferment –forbearance
8 Fees Private loans –vary by lender Federal Stafford and PLUS loans –origination fee: Stafford - 2% PLUS - 3% –1% default fee –fees are not always passed on to the borrower; varies by lender/guarantor
10 Grants Sources: –federal government –state governments Eligibility criteria: –financial need –mostly for undergraduates
11 Grants Funds available: –generally as academic terms begin Repayment: –not unless you drop out
12 Scholarships Sources: –private donors –your college Eligibility criteria: –academic or athletic excellence –community involvement –course of study or career choice –employment or membership –financial need
13 Scholarships Funds available: –generally as academic terms begin Repayment: –generally not unless you drop out –may have to repay if you don’t fulfill certain conditions
14 Scholarships Fastweb –www.fastweb.com College Board’s FUND FINDER –http://apps.collegeboard.com/cbsearch_ss/we lcome.jsp SRN Express –www.srnexpress.com Scholarships.com –www.scholarships.com
16 Work-study Sources: –federal government and your college Eligibility criteria: –financial need Funds available: –earn by working part-time while in college –paid weekly to monthly no up-front money for tuition and fees
17 Work-study Repayment: –no Other advantages: –on-campus job –usually 10-15 hours per week –work experience in your field
18 Best to worst types Grants and scholarships Work-study Loans –federal –private educational loans
19 Additional sources of income Part-time job –do not work too much Education tax credits and deductions
21 Who to go to for private loans Your school’s financial aid office Banks or other lenders Private loans may affect your eligibility for other forms of financial aid—be sure to check with your financial aid office first!
22 What to ask What is the interest rate on the loan and how is the rate calculated? At what point, and under what circumstances, might the rate change? Will I need a co-signer to qualify for a loan or to receive a lower interest rate? What fees are associated with the loan?
23 What to ask When do I begin making payments and what are my repayment options? Can I defer or reduce loan payments during tough times? How will this loan affect my eligibility for other forms of financial aid?
24 What you have learned How private loans differ from federal loans How to maximize your financial aid sources What to ask when shopping for a private loan