Blog

Student Loans: 5 loans you should know about

Posted by Lindie Johnson on Aug 21, 2013 11:32:00 AM

If you are like 70% of students out there, you may need to borrow for college.

32979STZCMYK75 Web

 Check out these top options for students and parents and remember, limit the amount you borrow as much as possible! 

1. The Federal Stafford Loan. This is the best borrowing option for students. Stafford loans come in two varieties. Subsidized loans offer interest paid by the government while the student is in school. This type is only available to undergraduate students whose families prove financial need. Students are responsible for paying all interest on unsubsidized loans. Unsubsidized loans are available to both undergraduate and graduate students. New this year, the rates on these loans are set annually and are fixed for the life of the life. Undergraduate students will receive a rate of 3.86% for the 2013/14 academic year, regardless of whether the loan is subsidized or unsubsidized. (Compared to 3.4% for subsidized loans and 6.8% for unsubsidized loans for the 2012/13 academic year). Graduate students will get a rate of 5.41% this year, compared to 6.8% last year. All options have a 1.051% default fee which is deducted from the total amount sent to the school. To be eligible for a Federal Stafford Loan, a student must complete a FAFSA. Extensive deferment and forbearance options are available. While these loans offer the best rates and most flexibility for students, there are borrowing limits (see below) so often times, families need to look beyond the Federal Stafford Loan to meet their borrowing needs. 

Annual Federal Stafford Loan Limits:  
 
Dependent Students
Independent Students
Year in School
Subsidized Limit
Total Limit
Subsidized Limit
Total Limit
First
$3,500
$5,500
$3,500
$9,500
Second
$4,500
$6,500
$4,500
$10,500
Third– Fifth
$5,500
$7,500
$5,500
$12,500
Grad Students
N/A
N/A
N/A
$20,500

2. Federal Perkins Loan. Many fewer students qualify for a Federal Perkins Loan than a Federal Stafford Loan. These loans are awarded based on financial need and are only available at schools that have a funds for the Perkins program. You must apply for financial aid and complete the FAFSA to be considered for a Perkins loan. If you qualify and the school awards you one, it will be included in your financial aid award letter. You may be awarded up to $5,500 a year if you are an undergraduate and $8,000 a year if you are graduate student. The standard repayment term on a Perkins loan is 10 years and they offer a low fixed rate of 5%. Many deferment and forbearance options are available on Perkins loans. 

3. RISLA Student Loan. The RISLA Student Loan is a fixed rate state-based loan. This loan is available to Rhode Island residents, no matter where the student chooses to attend school, and to any student from outside of Rhode Island that attends an eligible college or university in the State of Rhode Island. The RISLA Student Loan comes in two different repayment options. The immediate repayment option is the best deal and offers a low fixed rate of 5.39% (5.39% APR) and no origination fees. It has a 10 year repayment period. The deferred option has a rate of 7.49% (view APR and disclosures) and has a 4% origination fee that can be waived if the student completes a financial literacy tutorial on RISLA.com. Students who complete an eligible internship can qualify for a $2,000 loan forgiveness on their RISLA Student Loan and income based repayment is available to borrowers who land upon financial hardship. Apply now for a RISLA Education Loan

4. RISLA Parent Loan. Much like the RISLA Student Loan, the RISLA Parent Loan offers a low fixed rate of 5.39% and zero origination fees. However, this loan - unlike the RISLA Student Loan - is exclusively in the parent name and the student is not obligated on the debt. The standard repayment term is 10 years and the loan enters repayment after the final disbursement is sent to the school. 

5. Federal PLUS Loan. The Federal PLUS Loan offers parents and graduate students a fixed rate of 6.41% and a 4.204% origination fee. There is a deferment option on this loan that allows parents or students to delay payments until the student graduates. The standard repayment term is 10 years but repayment may be extended depending on the loan balance or if the borrower decides to consolidate the debt. Some schools include this loan in the financial aid award package but this loan is not awarded based on need. 

Before you borrow, remember to carefully compare rates and terms on education loans and be sure to fully understand your obligations. 

Topics: Borrowing for College, Financial Education for Students