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Applying for and managing your loans

When you apply for financial aid, colleges may offer loans as part of your financial aid package. A loan is money you borrow and must pay back with interest.

School Application
Step 1

Applying for Loans

After you select your college you will need to:

  • accept their financial aid package

  • decide which loans to accept and how much to take out

  • complete loan entrance counseling and promissory note for each loan.

Image by Kelly Sikkema
Step 2

Managing Loans

While in school you will need to:

  • keep all loans paperwork

  • take out new loans each year (if needed)

  • be mindful of the total loan amount you are responsible for paying back after college

  • know what to do if you leave school midway.

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Image by Sharon McCutcheon
Step 3

Repaying Loans

Once you graduate, you must start repaying your loans.  You should:

  • participate in loan exit counseling

  • choose payment plan (which you can change anytime)

  • make regular payments

  • explore forgiveness options (if available).

The U.S. Department of Education’s federal student loan program is the William D. Ford Federal Direct Loan (Direct Loan) Program.

 

Under this program, the U.S. Department of Education is your lender.

Agency or Institution
Aid Program
Maximum Amount for Dependent Students
Maximum Amount for Independent Students
Note
Banks, Financial Institution, Other
Alternative loans (LAST RESORT)
Open
Varies
Varies widely
Federal Government
Direct Subsidized Loan
$3,500; Year 1 $4,500; Year 2 $5,500; Year 3 & 4
$3,500; Year 1 $4,500; Year 2 $5,500; Year 3 & 4
Need-based. Interest rate for 2018-2019 is at 5.05%. Must be paid back.
Federal Government
Direct UNSubsidized Loan
$5,500; Year 1 $6,500; Year 2 $7,500; Year 3 & 4
$9,500; Year 1 $10,500; Year 2 $12,500; Year 3 & 4
Need-based. Interest rate for 2018-2019 is at 5.05%. Must be paid back.
Federal Government
Parent Plus
Cost of Attendance (COA)
COA
Fixed interest rate is 7.08% for the life of loan. Loans granted in the parent's name. Must be paid back.
Loan Term
Definition
Collections
The process in which a company is hired to recover funds that are past due.
Default
Failure to repay a loan according to the terms of the promissory note.
Deferral
Temporary postponement of loan payments.
Delinquency
Loan status indicating that loan is past due.
Entrance Counseling
An info session which takes place before the loan is disbursed. Required for first-time borrowers.
Exit Counseling
An info session which takes place after student leaves school.
Forgiveness
Releases borrower from the obligation to repay the loan.
Grace Period
A period of time between graduation (or leaving school) and when the loan repayment begins.
Loan Origination Fee
An initial charge for a loan disbursement.
Master Promissory Note
A BINDING legal contract between the a loan holder and borrower.

Tips and links

TIP

Click below to learn more about schools that meet full financial need with no loans.

Federal Student Loans 

You apply for federal loans through the FAFSA.  A federal student loan means:

  • you are borrowing money

  • you must repay the loan as well as interest that accrues on the loan.​

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  1. Direct Subsidized loans are available to low-income students.

  2. Direct Unsubsidized loans are not based on financial need.

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Federal student loans

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