I would love to target students navigating the student loan system. It's true that FFELP has the potential of going away this year but Direct is not an easier system to navigate. Even if FFELP does go away, thousands of students will still have FFELP loans and repayment schedules to handle. If you have a student loan question, please feel free to email me! I may post your question and answer as a full blog entry. If you would prefer I not then tell me so and I will not, but if your situation might help a future questioner then I might post a hypothetical situation.
As for credentials, I work for a servicing agency in the student loan business. I won’t say which servicing agent I work for. I am trying to not be biased toward or against any lender...except Sallie Mae...so please don't ask me who I think is the best. Obviously, I think my own company is the best...and that's a bit biased.
And now for actual content! I refuse to post a starting entry without legitimate information to use, so here you go: my quick and easy guide to student loan basics.
If you have questions about consolidation, please refer to the bottom of this post.
This post is intended to translate student loan processes, lingo, and rules into normal human being language, instead of Federal Guidelines. Contact me for all your Stafford, PLUS, and GradPlus loan questions and needs - from the servicer’s perspective. If it’s school-related, or something the Financial Aid Office of your school needs to answer, you must ask them. I can’t help ya, and neither can any other lender.
All FAFSA-related questions should be directed to the Department of Ed’s website and their phone number, or, once again, your Financial Aid Office. I’m working on learning more about the FAFSA to help you guys out, but currently I wouldn’t touch those questions with a ten foot pole. I’d hate to give you bad info!
So what is this post for?
I can answer general student loan questions for you. I can answer consolidation need-to-knows for you. If you pose a question that I don’t know the answer to, I will not steer you wrong: I will either find the answer for you, or try to provide some other source for you.
That being said, I’m going to outline some general information for you guys. If you don’t see your question already answered in this FAQ, feel no shame in asking. You wouldn’t believe the questions I hear on a daily basis.
Neato Links!!!
These are useful links that have come up during my time researching student loans. I am not responsible for nor claim credit for the information in any of these links. They are all outside sources that can save you tons of time and hassle in your student loan future.
A wonderful online database of general information about student loans (the difference between this site and my blog is that you can ask and receive an answer from me!):
http://www.finaid.org/
A website to help you find the right private lender for you:
http://www.simpletuition.com
(Important note - this site does not list ALL lenders and their benefits, but it's a damn fine starting point.)
If you are not sure if your school is a Title 4 school, search for it here:
http://www.fafsa.ed.gov/FOTWWebApp/FSLookupServlet
International Accredited Schools:
http://www.ed.gov/about/offices/list/ous/international/usnei/international/edlite-index.html
If you are looking for scholarships/grants:
http://www.fastweb.com
The National Student Loan Database (The Dept of Ed, basically) - register an account here and behold the glory!!! The NSLDS is a wonderful, magical website which will tell you every single federal and Perkins loan you've ever had. The drawback is that it's updated (in terms of amounts and status) about every 2-3 months. So it won't be the most up-to-date when it comes to your loan status. The best way to find out is to contact your lender and ask.
http://nslds.ed.gov
The Department of Education's Website ( All FAFSA-related questions go HERE ):
http://www.ed.gov
The FAFSA Online (Now available in Spanish!):
http://www.fafsa.ed.gov
Forgiveness Programs Available for Loans:
http://www.finaid.org/loans/forgiveness.phtml
(There are also state-specific programs available. Contact the state's Dept. of Education to see if there's anything for you.)
Stafford Loans
There are two kinds: Subsidized and Unsubsidized. What this means to you, the normal human being, is:
Subsidized loans do not accrue interest during any deferment or your grace period.
Unsubsidized loans always accrue interest, from the 1st day they’re disbursed to the day you pay them off. There are no exceptions here, this is a federal rule.
Stafford loans are in the student’s name only. Federal privacy laws don’t allow Mommy or Daddy to call in for info on these unless you’ve signed a nifty little release form with their names on it. Stop making them call for you, please.
The current interest rate for new federal loans is 5.6% on subsidized loans, 6.8% on unsubsidized loans. No, I don't know why they didn't make it 5.6% for both. We did not decide this; Uncle Sam did. If you would like to yell about it, call him. Most lenders can give you the number!
The variable interest rate changes every single July 1st. Every one. This has been true for freakin’ ever, and isn’t bound the change anytime soon. What did recently change is that it’s now a fixed rate - your 5.6% is permanent, but future loans may have different rates. Get it?
Aggregate Limits
Aggregate limit is a fancy way of saying “this is the total you can get, period.” This amount varies by grade level and graduate vs. undergraduate status.
Medical students get the special exception of being able to have more debt in their name. I pity you guys.
This is a list of the current aggregate limits. These limits may change but are currently in effect. You cannot take out more Stafford loans, per year, than the amounts listed. The school determines the amount you will be given; there is no guarantee that you will receive the full amount listed. You may be *eligible,* but you still might not receive it. The lender can do nothing, absolutely nothing, to change this.
NOTE: Medical students have different limits. You'll have to contact your Financial Aid Office for those numbers.
Year One :
Subsidized - 3500.00
Unsubsidized - 6000.00
Total Eligibility: 9500.00
Year Two
Sub - 4500.00
Unsub - 6000.00
Total: 10500.00
Year Three-Five
Sub - 5500.00
Unsub - 7000.00
Total: 12500.00
Graduate & Professional
Sub - 8500.00
Unsub - 12000.00
Total: 20500.00
Total Aggregate Limits for a:
Undergraduate Dependant Student - $31,000.00 (maximum of 23000 in subsidized)
Undergraduate Independent Student : - $57,500.00 (maximum of 23000 in subsidized)
Graduate/Professional Student : $138,500.00 (maximum of $65,500 in subsidized)
When can I file my FAFSA as an independent (not have to include parent's income info), and therefore become eligible for more money?
You are an independent student if:
- you're 24 years old by the end of the school (aka award) year
- you have legal dependents
- you are an orphan or ward of the court
- you are a veteran of the US armed forces
- you are a graduate or professional student
PLUS loans
These are in your parent’s name. They are not cosigning for you, they are taking out a loan using their credit and only in their name. This does involve a credit check, which will show on your parent’s credit score. This loan can never be changed into your name. Make sure your parents understand this, please.
Due to new federal policy, while you the student are attending classes at least half-time or more your parents are automatically eligible for a PLUS in-school deferment!!! This works roughly the same way as your own in-school deferment. If you can provide the lender with a verification of enrollment showing your status, they can slap a deferment on your parent's account and pause the payments for you.
The PLUS loan has also gained a grace period. This mirrors the Stafford 6-month grace period.
The interest rate is currently 8.5%, fixed. If you’re shopping around for incentives with lenders, get an incentive on the interest rate itself, not principal rebates. Principal rebates save you less in the long run (unless the parent is going to payoff the loan within the next couple of years, I suppose).
The PLUS loan can be used for personal expenses, but it is still sent to the school first. The school maintains controls over the amount disbursed. If they won't certify your 100,000 request, we can't send it.
GradPlus
For graduate/professional students only (independent undergraduate students do no qualify). This loan is based on credit but the student takes it out in their own name and it’s a much more lenient credit check because it’s for students, not parents. The interest rate is the same as the PLUS. This loan is deferred while the student is in school. NO PAYMENTS IN SCHOOL. But remember to keep yourself at least half time or more, or payments ahoy!
The GradPlus loan can be used for personal expenses, but it is still sent to the school first. The school maintains controls over the amount disbursed. If they won't certify your 100,000 request, we can't send it.
You can have a co-borrower for a GradPlus loan if you are not eligible based on your personal credit. The GradPlus loan can be consolidated with Stafford loans. If you have a co-borrower and you consolidate the GradPlus, the loan is considered paid in full through the consolidation and the co-borrower is no longer tied to the account nor has access to your information.
When are my loans deferred (no payments due)?
You must be at least half time or more at a Title 4 school - that is, any school that is capable of participating in the federal loan program. It doesn’t have to actually participate, it just has to be eligible to. Several online colleges are also eligible.
If you are not sure if your school is a Title 4 school, there's a handy search link up above for you to use!
Even if your grace period has expired or you have a consolidation you are still deferred while at least half time or more!!!
Your status is determined by the school, not the lender. If the school says you’re part time, or less than half time, you can’t have the in-school deferment on your account. I’m sorry!
What is a grace period?
A 6-month period without payments after dropping less than half time (graduation, taking a semester off) which only Stafford loans feature. If you enter your grace period, it is exactly 6 months long. If you are back in school at least half time or more even one day before the grace expires, it is returned to your account and you are placed back into the deferment.
GradPlus and PLUS loans now have a grace period.
If you consolidate, you no longer have a grace period. Note - you don’t lose your deferment, just your grace period. But remember, these are federal loans. There always may be a deferment or forbearance available.
What the heck is a deferment/forbearance?
This is a fancy way of saying “pausing your payments.” The difference is that during a deferment, your subsidized loans do not accrue interest, whereas during a forbearance, everything does. Unpaid interest becomes part of your principal balance at the end of a deferment or forbearance. You’re not required to pay it while on either one, but it’s highly recommended that you do.
PLUS and GradPlus loans are considered unsubsidized, and therefore always have interest accruing.
There are several different kinds of deferments and forbearances. For the sake of length, I won’t go through them here unless a demand rises/people constantly ask.
General Info
If you are in school, and you still have your grace period, you cannot consolidate until you’re in grace or repayment.
Your school determines the total amount of loans you’re eligible for, the amounts we the lender will send, and the dates we will send it. If you have questions/issues with any of this, you must contact them, not us. All we can do is cancel a loan per your request.
If the amount you received from your school is not enough to cover tuition and living expenses, ask them if they have an appeals process. Otherwise, ask Mom and Dad if they would be willing to go the PLUS route. If both of those are bust, you're stuck with an alternative loan, or...well...a full time job, I guess.
I’m hoping that this will become a resource for the many college kids/parents out there. You may email me any questions you have, even if you have a particularly embarrassing question; I won’t laugh.
Consolidation
Because of policy changes, many consolidation companies have shut down. Direct is the only FFELP consolidations company at the moment - that's the federal government, specifically.
Private Loan Consolidation
According to my research Wells Fargo is still offering private loan consolidation. If anyone knows of any other company please let me know and I'll include it in the blog.
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