Student Loans In The United States

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Federal loans are available to college and university students via funds disbursed directly to the school and are used to supplement personal and family resources, scholarships, grants, and work-study. They may be subsidized by the U.S. Government or may be unsubsidized depending on the student’s financial need (if poor, rich or beetween).

How exactly is done a student loan?

Both subsidized and unsubsidized loans are guaranteed by the U.S. Department of Education either directly or through guaranty agencies. Nearly all students are eligible to receive federal loans (regardless of credit score or other financial issues). Both types offer a grace period of six months, which means that no payments are due until six months after graduation or after the borrower becomes a less-than-half-time student without graduating. Both types have a fairly modest annual limit. The dependent undergraduate limit effective for loans disbursed on or after July 1, 2008 is as follows (combined subsidized and unsubsidized limits): $5,500 per year for freshman undergraduate students, $6,500 for sophomore undergraduates, and $7,500 per year for junior and senior undergraduate students, as well as students enrolled in teacher certification or preparatory coursework for graduate programs. For independent undergraduates, the limits (combined subsidized and unsubsidized) effective for loans disbursed on or after July 1, 2008 are higher: $9,500 per year for freshman undergraduate students, $10,500 for sophomore undergraduates, and $12,500 per year for junior and senior undergraduate students, as well as students enrolled in teacher certification or preparatory coursework for graduate programs. Subsidized federal student loans are only offered to students with a demonstrated financial need. Financial need may vary from school to school. For these loans, the federal government makes interest payments while the student is in college. For example, those who borrow $10,000 during college will owe $10,000 upon graduation.

Unsubsidized federal student loans are also guaranteed by the U.S. Government, but the government does not pay interest for the student, rather the interest accrues during college. Nearly all student are eligible for these loans regardless of demonstrated need. Those who borrow $10,000 during college will owe $10,000 plus interest upon graduation. For example, those who have borrowed $10,000 and had $2,000 accrue in interest will owe $12,000. Interest will begin accruing on the $12,000. The accrued interest will be “capitalized” into the loan amount, and the borrower will begin making payments on the accumulated total. Students can choose to pay the interest while still in college; however, few students choose to exercise this option.

Federal student loans for graduate students have higher limits: $8,500 for subsidized Stafford and $12,500 (limits may differ for certain courses of study) for unsubsidized Stafford. Many students also take advantage of the Federal Perkins Loan. For graduate students the limit for Perkins is $6,000 per year.

In general what do you need to apply to a college under a student loan?

In general you need the following documents:

1. Federal Student Aid Report (SAR) - Normally the SAR will be sent to you after completing the FAFSA. If the University of your choose is considered a Foreign School by the US Department of Education then, when applying for FAFSA, be aware that the Student Aid Report (SAR) will NOT be sent electronically to the
University.

2. Master Promissory Note (MPN) - It is the borrower’s responsibility to complete the Master Promissory Note. Be sure to sign and date the form and keep a copy for your records.

3. School Certification Form - The borrower is also responsible for mailing the School Certification form to the school so that the authorized school official may complete and certify.

Note: The borrower is not allowed to fill out any portion of the School Certification Form.

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