Show Me the Money!  Part 5: Low-Interest College Loan Programs

 

By DANIEL SILVER, Eastern Staff Writer

 

 In the real world not all students qualify for scholarships and grants, and not all families have the financial means to underwrite higher education for their children. In these cases it may be up to the students to invest in themselves—or rather, to request that a bank make the investment in the form of a loan that the students promise to repay.

Low-interest Government Loans

Fortunately, a healthy assortment of low-interest federal government loans exists for learners looking to further their training after high school and willing to make the investment. To apply for the loans, students and their parents or guardians must complete and submit the Free Application for Federal Student Aid (FAFSA). (This year’s FAFSA submission deadline expired March 1, and families who file a late form will likely receive less aid or less favorable aid than had they met the deadline. For more information on the FAFSA and on next year’s deadline, check the website http://http://www.fafsa.ed.gov/, call 1-800-4-FED-AID (1-800-433-3243), or see the first article in this series “Tips for the College Bound: What Is FAFSA?” on the Mineral Daily News-Tribune website: http://www.newstribune.info/.)

Based on the FAFSA application and the Expected Family Contribution (EFC) calculated from it, the government determines the level of each student’s eligibility for federal student aid. In general, the cost of attendance at a given school, minus the EFC (the amount the government expects the family to contribute based on income and assets), equals the student’s financial need. Students who show need according to this formula qualify for needs-based loans.

The government administers two main needs-based loans to students: the Federal Perkins Loans and the Federal Subsidized Stafford Loans. Schools usually reserve Perkins Loans, currently at 5-percent, for students with exceptional financial need. Perkins provides up to $4,000 each year for undergraduates to a maximum of $20,000 for undergraduate study. (Graduate and professional students can also qualify for Perkins loans.) The loan remains interest free to the student as long as he or she remains enrolled for at least one-half the fulltime course load. Repayment begins nine months after graduation or after the student no longer fulfills the minimum course load requirement.

Subsidized Stafford Loans

Federal Subsidized Stafford Loans, currently offer a variable 2.82-percent interest rate while a student remains in school and 3.42-percent during repayment. As long as the student remains enrolled in at least one-half the fulltime course load, the government will pay the interest on these loans. The student must start repayment of both interest and principal six months after graduation or after he or she no longer fulfills the minimum course load.

Sometimes a student may require more funds than the government’s need-and-eligibility formula allows. The student may then apply for Federal Unsubsidized Stafford Loans. (Students whose FAFSA applications do not show any need at all may also apply for these loans.) The chief difference for the borrower lies in the interest and repayment schedule. The government does not pay any interest for unsubsidized loans, so the student must either pay the interest each month as it accrues, or add the accumulating interest to the principal (i.e., capitalize the interest).

Whether a student borrows only subsidized loans, only unsubsidized loans, or a combination of the two, the Stafford program offers funding up to a maximum of $2,625 for first-year undergraduates; $3,500 for second-year students; and $5500 for each additional year of undergraduate study. Students may borrow Stafford funds up to a maximum total of $23,000 for their undergraduate career. (Graduate and professional students may take up to $8500 per year in Stafford loans.)

To provide additional monies for undergraduate expenses, parents of dependent students enrolled at least half-time may take education loans under the PLUS (Parent Loans for Undergraduate Students) Loan option. Borrowers must demonstrate a positive credit history and be the student’s natural, adoptive or in certain circumstances, step- parent. Banks and other lending institutions currently offer PLUS loans at a variable 4.22-percent.

Additional Stafford Loans

Dependent students whose parents do not qualify for PLUS loans, and independent students, can also apply for “Additional Unsubsidized Federal Stafford Loans” up to $6,625 for the first two undergraduate years and up to $7,500 for each additional year. The maximum total funding available under this program is $46,000 at interest rates identical to the Stafford rates noted above. (All loans rates are variable and readjusted every July 1. Federal law sets a maximum of 8.25-percent interest for Stafford loans and a maximum of 9-percent for the PLUS program.)

 

Additional Resources: 

 

All "College Tips" columns are available at http://www.newstribune.info/

U.S. Department of Education’s Federal Student Aid (FSA) office: http://studentaid.ed.gov/students/publications/student_guide/2004_2005/english/index.htm

 

WV Apply, Admission and Financial Aid Information at http://www.wvapply.com/

 

American Education Services http://www.aessuccess.org/; (1-304-345-7211 or toll free: 1-800-437-3692)

 

WV Mentor, A Source for Higher Education in West Virginia. http://www.wvmentor.org/

 

Mineral County Technical Center at http://mctc.mine.tec.wv.us/college.htm

 

Eastern Community and Technical College at http://www.eastern.wvnet.edu/ (304-434-8000; or tollfree: 1-877-982-2322)


Potomac State College of West Virginia University at http://www.potomacstatecollege.edu/ or  (304-788-6820 or tollfree: 1-800-262-7332)

 

Community and Technical College System of West Virginia at http://www.wvtechprpe.wvnet.edu (304-558-2411)

 

 

Peterson’s Get A Jump! The Financial Aid Answer Book (2nd edition)

 

Your high school guidance counselor

Your college’s financial aid administrator