Student Loans Overview

Importance of Student Loans

• Essential for many students to attend college and complete a degree.
• Over two-thirds of current college students require loans.
• Offer relatively low interest rates and borrower-friendly repayment options.

Loan Limits

• Loans are capped by type and are only up to the cost of education.
• Avoid borrowing more than the educational cost to maintain eligibility for some gift aids.

Types of Student Loans

1. Federal Loans

   • Provided by the government; typically the first choice for most students.
   • Common federal loan: Direct Loan
     • Interest rate and terms set by the federal government.
     • Fixed interest rate for the life of the loan.

2. Institutional Loans

   • Offered through educational institutions.

3. Private Loans

   • Provided by private lenders.

Direct Loans

• Subsidized Direct Loans: Interest does not accrue while in school, in a grace period, or during authorized deferment.

  • Government pays interest during these times.
  • Verify exceptions with loan servicer.

• Unsubsidized Direct Loans: Borrower is responsible for all interest starting from disbursement.

Life Cycle of a Federal Direct Loan

1. In-School Status

   • Maintain at least halftime status as defined by your school.
   • No payments required; interest accrues on unsubsidized loans.

2. Grace Period

   • Six-month period after leaving school or dropping below halftime status.
   • No payments required during this time.

3. Repayment

   • Begins after the grace period.
   • Payments required on both interest and principal balance.

Next Steps

• Future lessons will cover borrower rights and responsibilities.