Student Loans

Student loans, unlike grants and work-study, are borrowed money that must be repaid, with interest, just like car loans and home mortgages. You cannot have these loans canceled because you didn’t like the education you received, didn’t get a job in your field of study or because you’re having financial difficulty. Loans are legal obligations, so before you take out a student loan, think about the amount you’ll have to repay over the years. 

Types of loans:

  • Federal Perkins Loans are loans that offer a very low interest rate and are available to students who demonstrate exceptional financial need. The government pays the interest on Federal Perkins Loans while the student is enrolled in school and for a nine month grace period following graduation. Students begin making payments after the grace period.
  • Stafford Loans are for undergraduate, graduate and professional degree students. You must be enrolled as at least a half-time student to be eligible for a Stafford Loan. There are two types of Stafford Loans: subsidized and unsubsidized. You must have financial need to receive a subsidized Stafford Loan. The U.S. Department of Education will pay (subsidize) the interest that accrues on subsidized Stafford Loans during certain periods. Financial need is not a requirement to obtain an unsubsidized Stafford Loan. You are responsible for paying the interest that accrues on unsubsidized Stafford Loans.
  • PLUS Loans (Direct or FFEL) are loans parents can obtain to help pay the cost of education for their dependent undergraduate children. In addition, graduate and professional degree students may obtain PLUS Loans to help pay for their own education.
  • PLUS Loans for Graduate and Professional Degree Students – Adult students may also take out PLUS Loans after exhausting the limits for other federal loan options. Students must pass a credit check or have a co-signer. Interest begins accumulating after the loan is dispersed. However, students may ask for a payment deferment while they are in school. In the case of a deferment, the first payment is due forty-five days after the end of the deferment period.

These loans are made through one of two U.S. Department of Education programs:

William D. Ford Federal Direct Loan (Direct Loan) Program

Loans made through this program are referred to as Direct Loans. Eligible students and parents borrow directly from the U.S. Department of Education at participating schools. Direct Loans include subsidized and unsubsidized Direct Stafford Loans (also known as Direct Subsidized Loans and Direct Unsubsidized Loans), Direct PLUS Loans, and Direct Consolidation Loans. You repay these loans directly to us.

Federal Family Education Loan (FFEL) Program

Loans made through this program are referred to as FFEL Loans. Private lenders provide funds that are guaranteed by the federal government. FFEL Loans include subsidized and unsubsidized FFEL Stafford Loans, FFEL PLUS Loans and FFEL Consolidation Loans. You repay these loans to the bank or private lender that made you the loan.

Whether you (or your parents) receive a Stafford or PLUS Loan depends on which program the school you attend participates in. Most schools participate in one or the other, although some schools participate in both.

It’s possible for you to receive both Direct and FFEL Loans but you can’t receive the same type of Direct or FFEL Loan for the same period of enrollment at the same school. Some schools use one loan program for Stafford Loans and another loan program for PLUS Loans. For example, a graduate or professional student could receive a Direct Stafford Loan and a FFEL PLUS Loan for the same period of enrollment at the same school.

Qualifying for Federal Student Loans

To be eligible for federal student loans you must be a U.S citizen with a social security number. You must have a high school diploma, a GED certificate, or have passed an alternative exam. You must be enrolled as a regular student working toward a certificate or degree at a school that is eligible to offer federal aid.

Additionally, you must not have certain drug convictions on your record (convictions that happened prior to your eighteenth birthday don’t count, unless you were tried as an adult). You cannot currently be in default for any student loans you already have, or owe the government refund money from grants you were awarded.

Applying for Federal Student Loans

Before applying for federal student loans, set up an in-person or phone appointment with your online school’s financial aid counselor. He will be able to offer advice for applying and suggestions for alternative sources of aid (such as scholarships and school-based grants).

Once you’ve collected the needed documents such as social security numbers and tax returns, it’s easy to apply. You will need to fill out a form called the Free Application for Federal Student Aid (FAFSA). The FAFSA can be filled out online or on paper.

Find an Online School Offering Federal Student Loans

Keep in mind that not all online schools offer federal student loans. To find out of your school is able to distribute student loans, call the school’s financial aid office. You may also search for the college’s Federal School Code on the federal financial aid website.

Using Student Loans Wisely

When you receive your federal aid award, the bulk of the money will be applied to your tuition. Any remaining money will be given to you for other school-related expenses (textbooks, etc.) Often, you will be eligible to receive more money than is necessary. Try to use as little money as possible and return any money you do not need. Remember, student loans must be repaid.

Once you finish your online education, you will begin student loan repayment. At this point, consider refinancing your student loans so you have one monthly payment at a lower interest rate. Meet with a financial counselor to discuss your options.

Update on Student Loan Programs

As a result of the Health Care and Education Reconciliation Act, beginning July 1, 2010, federal student loans will no longer be made by private lenders under the Federal Family Education Loan (FFEL) Program. Instead, all new federal student loans will come directly from the
U.S. Department of Education under the Direct Loan Program.

This change does not impact the process of applying for federal grants, loans and work-study or the amount of federal aid that students are eligible to receive. Students interested in receiving federal student aid should continue to complete a Free Application for Federal Student Aid (FAFSA) for each school year that they wish to be considered for aid. If you have any questions about applying for federal student aid, please contact