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Student Loans 101

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What are Student Loans?

Student loans are funds borrowed to pay for tuition and other university expenses, and must be repaid with interest. While both the federal government and private institutions offer student loans, federal loans have benefits like fixed interest rates and income-driven repayment plans. Before looking into private loans, you should explore all your options for federal student aid. Find out how much you qualify for by filling out a Free Application for Federal Student Aid (FAFSA).

There are two main types of federal student loans:

  • Direct Subsidized Loans (also known as Direct Stafford Loans or Stafford Loans) – Students with a demonstrated financial need may qualify for subsidized student loans. In this type of loan, students do not have to pay interest on loans while enrolled or during a six month grace period after graduation.
  • Direct Unsubsidized Loans – Regardless of financial need, all students qualify for unsubsidized loans. With this type of loan, students are responsible for making interest payments on loans while enrolled. 

What loans you qualify for vary based on financial need, how many credit hours you have, and whether you are an independent or dependent student. Continuing and transfer students may apply if they have earned the required number of hours each year with a grade point average of at least 2.0. If you’re a first time borrower who has earned less than 30 hours, you won’t receive any funds until you’ve attended classes for 30 days.

Independent or Dependent?

You’re an Independent Student if you’re one of the following:

• at least 24 years old
• married
• have legal dependents other than a spouse
• a graduate or professional student
• a veteran or a member of the armed forces
• an orphan
• a ward of the court
• an emancipated minor or
• someone who is homeless or at risk of becoming homeless

If you don’t meet the following criteria, you’re considered a dependent student, and your parents might qualify for a PLUS loan.

Qualifying for Student Loans

No matter the type of loan, you must be enrolled for at least 6 credit hours to qualify for federal student loans. While you can potentially qualify for both subsidized and unsubsidized loans, there are annual limits on the amount you may be eligible to receive each year. No matter your combination of subsidized and unsubsidized loans, the total combination of your loans won’t exceed the annual limit.

There are also limits on the total amounts that you may borrow during your education (also known as aggregate limits). If you reach the aggregate limit, you won’t qualify for any more loans unless you start repaying your loans.

Remember, these numbers are the maximum amounts — the loan amount you are eligible for may be less than what’s listed here. Fill out and submit your FAFSA early to know exactly what you qualify for.

Year Subsidized Limit Annual Limit (includes both subsidized and unsubsidized loan amounts)
Freshmen (under 30 hrs.) $3,500 $5,500
Sophomore (over 30 hrs., under 60) $4,500 $6,500
Junior (over 60 hrs., under 90) $5,500 $7,500
Senior (over 60 hrs., under 90) $5,500 $7,500
     
Aggregate Loan Limit $23,000 $31,000
(and dependent students whose parents don’t qualify for PLUS loans)
Year Subsidized Limit Annual Limit (includes both subsidized and unsubsidized loans)
Freshmen (under 30 hrs.) $3,500 $9,500
Sophomore (over 30 hrs., under 60) $4,500 $10,500
Junior (over 60 hrs., under 90) $5,500 $12,500
Senior (over 60 hrs., under 90) $5,500 $12,500
     
Professional or Graduate Student N/A $20,500
     
Total Undergraduate Aggregate Loan Limit $23,000 $57,000
Total Professional or Graduate Student Aggregate Loan Limit $65,500 (includes all loans received in undergraduate study) $138,500 (includes all loans received in undergraduate study)

PLUS Loans

PLUS loans are available to qualifying parents of undergraduate students enrolled in at least 6 semester hours, and professional or graduate students. Like with direct subsidized and unsubsidized loans, the Department of Education is the lender. Unlike unsubsidized or subsidized loans, however, applicants must not have adverse credit history to qualify.

A credit check will be conducted once you apply to determine your eligibility. The maximum PLUS loan amount you can receive is the cost of attendance minus any other financial aid you are receiving. Find out more about PLUS loans.

You may have adverse credit history if you have:

  • An outstanding balance of more than $2,085 that is more than 90 days delinquent, or that has been charged off or placed in collections in the last two years.
  • A default determination in the last five years.
  • A bankruptcy discharge in the last five years.
  • A repossession in the last five years.
  • A foreclosure in the last five years.
  • A charge-off/write-off of federal student aid debt in the last five years.
  • Wage garnishment in the last five years.
  • A tax lien in the last five years.

Fees and Interest

For most federal student loans, you’ll be charged a percentage of the loan amount as a fee, which will be deducted from each disbursement you receive. While this means the amount you receive will be slightly less than what you borrow, you’re still responsible for repaying the entire loan.

Interest on student loans is calculated based on how much you have in unpaid loans. Depending on whether your loans are subsidized or unsubsidized, you may be responsible for paying the interest on your loans while you’re enrolled. If you don’t make interest payments when you’re responsible for paying them, the amount may be added to the total amount of your loan.

2019 Fee Rates
Loan TypeFirst Disbursement DateLoan Fee
Direct Subsidized Loans and Direct Unsubsidized LoansOn or after 10/1/19 and before 10/1/20 1.059%
On or after 10/1/18 and before 10/1/191.062%
Direct PLUS LoansOn or after 10/1/19 and before 10/1/20 4.236%
On or after 10/1/18 and before 10/1/194.248%
July 1, 2019- July 1, 2020 Interest Rates
Loan Type Borrower Type Fixed Interest Rate
Direct Subsidized Loans and Direct Unsubsidized Loans Undergraduate 4.53%
Direct Unsubsidized Loans Graduate or Professional 6.08%
Direct PLUS Loans Parents and Graduate or Professional Students 7.08%