Student Loans FAQs
What are my student loan options      
The Federal Perkins Loan is a 5-percent fixed-rate loan made directly by a school to the student using federal government funds. Schools may or may not decide to participate in the Perkins Loan program, and a school that does participate may run out of Perkins Loan funds before all requests are fulfilled. Unlike Stafford and PLUS Loans, a Perkins Loan is reserved for those students who can demonstrate financial need and schools may allocate the loans to those with the most need
 
What is a Federal Stafford Loan      
Your school may be able to process your application for a Stafford Loan with borrowed funds coming straight from the federal government. This is typically known as a Direct Stafford Loan. Another approach is to apply with a third-party lender (bank, credit union, etc.) which makes its own loans but is protected from loss through guarantees from the federal government. This alternative is known as a FFELP Stafford Loan. (FFELP stands for the Federal Family Education Loan Program). Both types of Stafford Loans carry the same interest rate and have similar characteristics. You will be required to pay as much as 4% of the loan amount in processing and guaranty fees. These fees are typically deducted from the loan disbursement. With either the FFELP or Direct Stafford Loan, you are required to submit a FAFSA prior to making application for the loan. Loan proceeds are paid directly to your school from the lender or federal government. Your school will apply the funds to your tuition account, with any excess applied to other expenses, retained as a credit on your account, or refunded to you. The repayment period can be as many as 10 years, not including periods of deferment or forbearance. Your borrowing limit with a Stafford Loan depends on which year you are in at college, and whether you are considered a "dependent" student or "independent" student under criteria established by federal law and the school's financial aid office. (If your parents are turned down for a Federal PLUS Loan, you are automatically considered independent).
 
What is a Federal PLUS Loan      
The interest rate on PLUS Loans originating prior to July 1, 2006 adjusts annually on July 1 based on Treasury Bill rates and other factors. The interest rate is 8.02% for the period July 1, 2007 through June 30, 2008. The rates on these loans may not go above 9.00% in any future year. Loans originated in periods prior to July 1, 1998 are subject to different rates and limits. PLUS Loans for which the first disbursement is made after June 30, 2006 are fixed-rate loans. Loans made under the FFELP will have an 8.5% interest rate, while Federal Direct PLUS Loans will have a 7.9% rate.
 
What is a Federal Perkins Loan      
Repayment of a Perkins Loan begins nine months after graduating, leaving school, or dropping to below half-time status. The grace period may be different for students attending college less than half-time. You may be allowed as many as 10 years to repay the loan in full. Under certain circumstances you may receive a deferment or forbearance of loan principal and interest. The loan can also be canceled under certain circumstances, such as your death or permanent disability, or if you work in certain public service jobs after leaving school.
 
What is a Federal Consolidation Loan      
Federal Consolidation Loans may be either direct from the government (Direct Consolidation Loans) or through an outside lender (FFELP Consolidation Loan). Information about Direct Consolidation Loans may be obtained from the school financial aid office for those students still in school, or from the Federal Direct Consolidation Loans Information Center.
 
Who is eligible to apply for federal student loans and other federal student aid      
Generally speaking, it depends on the regulations of each school. The eligibility requirements for participation in student aid programs administered by the U.S
 
Do I have to show financial need in order to obtain a federal student loan      
Federal student loan programs are designed for half-to-full-time students with demonstrated financial need as well as for those without need. However, the Stafford Loan program requires that the Free Application for Federal Student Aid (FAFSA) be filed even when you are not counting on a need-based subsidy. For information on filing the FAFSA.
 
Will the interest on my student loan be deductible in computing my federal income taxes      
The deduction is fully allowed for singles with modified adjusted gross income ("MAGI") below $50,000 and partly allowed for singles with MAGI up to $65,000. Married couples filing jointly get the full deduction with MAGI up to $100,000 and a partial deduction with MAGI up to $130,000. MAGI is your income after certain adjustments (such as IRA contributions and alimony payments) but before claiming exemptions, the standard deduction, or itemized deductions. For most people, modified adjusted gross income is the same as AGI (not counting the deduction for student loan interest or for qualified tuition and related expenses), but AGI must be increased if you take advantage of certain exclusions for income earned abroad.
 
Can student loans cover off-campus housing      
Now, I have heard tell of many things not-so-legit that student loan money gets used for. Sure, they cut you a check for the extra leftover money and how can they really know...? But be warned that if they find out you are doing something less-than-legit with loan funds, you might find yourself with your loans "decertified" and unable to get more. Not worth messing up your education to use loan funds to buy something inappropriate
 
What is a Stafford Loan      
You might also be able to borrow funds beyond your subsidized amount or even if you don't have demonstrated financial need. In that case, you'd receive an unsubsidized loan. Your school will subtract the total amount of your other financial aid from your cost of attendance to determine whether you are eligible for unsubsidized lending. Unlike a subsidized loan, you are responsible for the interest from the time the unsubsidized loan is disbursed until it is paid in full. You can choose to pay the interest or allow it to accumulate and be capitalized (that is, added to the principal amount).
 
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