Because it's expensive to go to college, loans are an essential part of financing tuition for many students. A number of loan options are available to make ends meet. The amount you can borrow depends on the type or types of loans you opt for and the level of education you are pursuing.
Federal Loan Differences
Federal Stafford loans are available to all undergraduate students attending matriculated classes at an authorized university. Stafford loans are offered in subsidized and unsubsidized forms. Subsidized loans are provided only to students who have financial need. These loans guarantee that no interest will be assessed on the balance of the loan as long as the student is enrolled at least full time. The no-interest period continues for six months after attendance has ended for any reason (graduation, withdrawal) and during any deferments that might be requested throughout the life of the loan. Unsubsidized loans are available to anyone and have no special interest relief.
Undergraduate students who are reported as dependents on their parents' tax returns are eligible for subsidized Stafford loans of $3,500 and unsubsidized loans of $2,000 during their first year of classes. In the second year the figures rise to $4,500 for subsidized loans and $2,000 for unsubsidized loans. In the third and fourth years the figures rise to $5,500 for subsidized and $2,000 for unsubsidized. The total amount that any dependent undergraduate student can borrow is $23,000 subsidized and $8,000 unsubsidized.
Undergrads who are not reported as dependents on their parents' annual tax returns can borrow more than dependents who are assumed to be receiving parental help toward tuition. The total subsidized and unsubsidized Stafford loan allowances for independent undergraduates are $3,500 and $6,000 for the first year, $4,500 and $6,000 for the second, and $5,500 and $7,000 for the third and fourth years. The total allowed over an undergraduate career is $23,000 subsidized and $34,500 unsubsidized.
Graduate Student Stafford Loans
Graduate students have higher federal Stafford loan limits. Stafford loans for grad students are also unaffected by the year of study. Students are provided up to $8,500 per year in subsidized funds and up to $12,000 per year in unsubsidized funds for each year of graduate study they undertake. The total allowance for graduate study is $138,500, with $65,500 of that being subsidized.
Federal Perkins Loans
Federal Perkins loans are issued only to students with little financial support who have no other means to meet the total cost of tuition. Perkins loans are made by the school itself and subsidized by the federal government, which makes interest payments on the loan until the student graduates or stops attending. The limits for Perkins loans are $5,500 per year for undergraduates and $8,000 per year for graduates.
Federal PLUS (Parent Loans for Undergraduate Students) loans are meant to fill any gap between your Stafford and Perkins loans and the cost of tuition. PLUS loans are similar to private loans in that they can be taken for any amount up to the total tuition and are dependent on your credit score. If you take a PLUS loan, you must begin paying interest immediately. PLUS loans are also available for graduate students enrolled for at least six credits.
While federal loans work out to be cheaper and more easily attainable for most students, many will have to supplement their federal aid package with some form of private loan to meet the demands of tuition and peripheral college costs. Private student loans are issued by banks and other traditional lenders. They are available for as much as you request up to the total cost of tuition pending credit approval. Private loans can be taken by the student or the parent of a student. Repayment requirements vary by lender.
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