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Loans

Education Loan Comes in Many Shapes & Sizes

Education loans are borrowed money that must be repaid with interest. There are several types of education loans: Federal Perkins Loans, Federal Stafford Loans, Federal PLUS loans, state-based education loans, and private education loans. In order to apply for federal loans, you must fill out the Free Application for Federal Student Aid (FAFSA). If you receive a loan, you will need to sign a promissory note binding you to the terms of the loan and stating that you agree to repay your loan.

What you should   know before     you bo

Federal Perkins Loan

Description: Loan for students with a low fixed interest rate, funded by federal government and administered by your child's college. This loan is awarded based on need to undergrad & graduate students. Each school has a limited amount of funds to award each year.
Rate: 5% fixed
Fees: None
Eligibility: U.S. Citizen/Permanent residents; full/part-time undergrad/grad student; need-based
Amount: Up to $5,500 annually for undergrads; $8,000 for graduates
Repayment Term: Up to 10 years 
Grade Period: 9 months
How to apply: Complete the
FAFSA by your school's specified deadline.

Federal Subsidized and Unsubsidized Loans

Typically a student's first option for borrowing. This loan comes in both a subsidized and an unsubsidized version. Subsidized loans are awarded to undergraduate students who can prove financial need. The federal governments covers all interest payments on these loans while the student is in school. Students are responsible for all interest payments on unsubsidized loans, although they may be deferred while the student is in school. 

Rate for 2014/15 academic year: 4.66% for undergraduate students, 6.21% for graduate students. Rates are fixed and are set every May for the upcoming academic year. 

Fees: 1.072% which will increase on Oct 1, 2014

Eligibility: U.S. Citizen/Permanent residents; full/part-time undergrad/grad student; need-based

Amount: For dependent students: 1st year - $5,500 (no more than $3,500 can be subsidized), 2nd year - $6,500 (no more than $4,500 can be subsidized), 3rd year and beyond - $7,500 (no more than $5,500 can be subsidized). Dependent undergraduate student may not borrower for than $31,000 over all years (no more than $23,000 of this amount may be in subsidized loans). For independent students: 1st year - $9,500 (no more than $3,500 can be subsidized), 2nd year - $10,500 (no more than $4,500 can be subsidized), 3rd year and beyond - $12,500 (no more than $5,500 can be subsidized). Independent undergraduate students may not borrower for than $57,500 over all years (no more than $23,000 of this amount may be in subsidized loans). Graduate/Professional Students: Borrow up to $20,500 in unsubsidized funds per year. Cannot borrow more than $138,500 for all years. 

Repayment Term: Up to 10 years 

Grade Period: 6 months

How to apply: Complete the FAFSA by your school's specified deadline.

Federal PLUS Loan

Description: Loan for parents and graduate students funded and administered by the U.S. Dept. of Education.
Rate: Fixed at 7.21% for the 2014/15 academic year. Rates change annually and are based on the 10-year Treasury bill plus a markup. 
Fees: 4.288% fee; fees are deducted from the total amount disbursed to the school
Eligibility: U.S. Citizen/permanent resident; parent of full/part-time, parent of dependent undergraduate student; graduate student. A credit check is required.
Amount: Up to the difference between college costs and financial aid received.
Repayment Term: Up to 10 years for a standard repayment term. Loan repayment begins within 60 days after final disbursement. Parents can choose to defer payments until up to 6 months after the student leaves school or drops below half-time status. Interest accrues during this period and can be paid monthly, quarterly, or will be capitalized. Payments can be deferred for graduate students until graduation. Forbearance options are also available.
Minimum payment: $50/month
How to apply: Submit the
FAFSA by your school's deadline. You will also need to complete an application, known as a Master Promissory Note, to accept your award.

State-Based Education Loan

Description: An alternative loan for students and/or parents available from state-based lenders. These lenders often offer fixed rate loans, sometimes at rates lower than some of the federal loan programs. Often times, loans offered by these lenders are only available to students either from the state the agency is located in or to students attending college in that state.

Eligibility: Typically for students enrolled at least half-time; a credit check is usually required; cosigner is usually required
Amount: Loan limits vary by program but do not to exceed cost of attendance.
Repayment Term: Repayment terms vary by program.
How to apply: Each lender will have specific procedures for you to follow.

Learn about low fixed rate options offered by Rhode Island Student Loan Authority, Rhode Island's non-profit state authority. 

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Private Loan

Description: A private supplemental loan for students available from lender nationwide, generally  with a  variable interest rate based off of Prime or LIBOR plus a mark-up determined by credit rating. Keep in mind that variable rates are at all time lows so the advertised rate on most of these programs may not be what you pay over the life of your repayment term. When interest rates rise, so will your monthly payment amount. Fees and rates vary based on loan program and credit rating.

Eligibility: Typically for students enrolled at least half-time; a credit check is usually required; cosigner is often required
Amount: Loan limits vary by program but not to exceed cost of attendance.
Repayment Term: Repayment terms vary by program.
How to apply: Each lender will have specific procedures for you to follow.