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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 Direct Stafford Loans

Description: Loan for students funded and administered the U.S. Dept. of Education. These loans come in two forms: subsidized and unsubsidized. The federal government pays interest on subsidized loans while the student is in school. The student is responsible for all interest charges on unsubsidized loans.Graduate students are not eligible for subsidized loans.

Rates for 2012/13 academic year: 

Subsidized: 6.8% fixed
Unsubsidized: 6.8% fixed
 

Fees: 1% default fee. Fees are deducted from the disbursed amount to the school.
Eligibility: U.S. Citizen/Permanent residents; full/part-time undergrad/grad students. Subsidized: Students who can prove financial need. Unsubsidized: Students who cannot prove financial need.
Annual Limits:  

 
Dependent Students
Independent Students
Year in School
Subsidized Limit
Total Limit
Subsidized Limit
Total Limit
First
$3,500
$5,500
$3,500
$9,500
Second
$4,500
$6,500
$4,500
$10,500
Third– Fifth
$5,500
$7,500
$5,500
$12,500
Grad Students
$8,500
$20,500
$8,500
$20,500

Aggregate limits also apply. 

Repayment Term: Up to 10 years for standard repayment. Graduated, income-sensitive, extended, and income based repayment options also available. Learn more here. In school deferment and forbearance options available.

Grace Period: 6 months
How to apply: Complete the FAFSA by your school's deadline. You will also have to complete an additional application, known as a Master Promissory Note, to accept your award.

Federal PLUS Loan

Description: Loan for parents and graduate students funded and administered by the U.S. Dept. of Education.
Rate: 7.9% fixed
Fees: 4% 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.