Financing Your Higher Education Student Loans Financing Your Higher Education

The Two Major Types of Student Loans Federal Loans Make up 80% of all student loans No credit check needed for undergraduate loans Can be consolidated Private Loans: Require Credit Check/Cosigner Have Higher Interest Rates May contain fees

Federal: Stafford Loan Most Common Student Loan Loan is direct to the student Low fixed interest rate of 3.6% for 2016-17 academic year Loan does not need to be paid while student is attending school Each student has a maximum amount he or she is eligible to borrow each year in Stafford loans. There are annual limits as well as total limits. Stafford Loans Can Be Subsidized or Unsubsidized Subsidized: Government pays the interest while you are in school. Strict eligibility limits (income, etc) Unsubsidized: Interest accrues while you are in school…payments can be deferred until after graduation.

Stafford Loan Limits Year Subsidized Loan Limit Annual Limit for Dependent Students Annual Limit for Independent Students First Year $3,500 $5,500 $9,500 Second Year $4,500 $6,500 $10,500 Third Year and Beyond $7,500 $12,500

Federal: Perkins Loan Even better than a Stafford Loan Loan is direct to student All Perkins Loans Subsidized Lower interest rate: 5% Loan Limit of $5500 per year Unfortunately, the Perkins Loan Program is being discontinued as of 2017

Federal: PLUS Loan PLUS – Parent Loan for Undergraduate Students Obviously usually taken out by a parent Still a Fixed Interest Rate Government Loan Cons Slightly higher interest rate: 6.31% 4% fee to take out loan. Fee comes off of disbursement Pros PLUS Loans have no limit Loan can be used for things other than tuition as well (books, food, etc).

An example Logan will be attending State A&M University in the fall as a freshman. Tuition, Room/Board etc costs will total $26,000 Logan’s parents make $150,000 per year combined. They have agreed to pay $1000 per month toward school. Logan will have to take loans for the rest. Find the financial breakdown of Logan’s college costs: Parent contribution Stafford Loan: Subsidized or Unsubsidized PLUS Loan: