1. Financing Your Higher Education
Student Loans
Financing Your Higher Education

2. 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

3. Federal: Stafford Loan
Most Common Student Loan
Loan is direct to the student
Low fixed interest rate of 3.6% for 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.

4. 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

5. 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

6. 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).

7. 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: