Student Loans

Student loans can be quite confusing since there are so many different types available. We have defined the most popular loan types below.

Stafford Loans

These loans are usually the lowest interest rate loans most students obtain. The annual limits for these loans range from $6,625 for college freshmen to $18,500 for graduate students. They are federally administered and can be either subsidized or unsubsidized.

• Subsidized: The interest on subsidized loans is paid by the federal government until you have been out of school for 6 months. You must demonstrate financial need for the subsidized Stafford loan.

• Unsubsidized: The interest accrues the entire time you are a student. You do not have to show financial need to qualify for this loan.

PLUS Loans

PLUS loans are relatively low interest rate loans (usually about 0.75% higher than the Stafford rate) that are made to parents to cover the cost of their children's undergraduate educational expenses. After passing a credit check, the parents can borrow as much as is necessary to cover the educational costs.

Consolidation Loans

As the name implies, consolidation loans consolidate many federal loans into one larger loan. The payment is lowered by extending the payback time of the loans. The maximum limit is dependent on the financial need demonstrated. You can apply for a consolidation loan by submitting the FAFSA application.

Perkins Loans

Perkins loans carry the lowest interest rate of all the student loans. You must demonstrate extreme financial need to qualify for this federally-sponsored loan. The maximum amounts are set at $20,000 for undergraduate and $40,000 for graduate students.

Private Loans

Private loans available from banks and other private lenders can cover any costs beyond what the government loans provide. These should be used as a means of last resort. You will also want to be very careful to read everything carefully before signing for this type of loan. Private loans carry the highest interest rates. 

They often times provide the total amount you need for the school year several weeks before the fall semester payment deadline. If this happens, you will generally have a temporary credit balance with the bursar's office. The school will likely need a few weeks to issue you a check for this amount and interest will be accruing for these funds from the initial date the private bank distributed the funds to the college. We share this with you not to frighten you but to make you aware of why private loans should be used as only a means of last resort.

For this reason alone, Sallie Mae should be seriously considered as a preferred lender.

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