Loan Types
Student loans have become an essential component students use to finance their educational expenses. Loans must be repaid and, therefore, they should be used sparingly and wisely. If you accept a loan, you must remember that you are responsible for repaying the loan plus the interest. The more you borrow the higher your monthly repayment will be, so only borrow what you need.
Federal Stafford Loans
Stafford Loans are federal loans that are available to help eligible students finance the cost of their education. There are two types of Stafford loans: Subsidized and Unsubsidized.
Subsidized Stafford Loan
Eligibility for the Subsidized Stafford Loan is based on financial need as determined by the need analysis process. A student must submit a Free Application for Federal Student Aid (FAFSA) to be eligible for this loan. In addition, UW-Parkside students must be enrolled at least half time (undergraduates- minimum of 6 credits; graduates- minimum of 4 credits). Students usually apply for this loan for an academic year (two semesters). One-half of the total loan amount will be disbursed each semester. Funds are automatically credited to the student's account in the UW-Parkside Cashier's Office. See table below for annual loan limits.
The federal government pays the loan interest on a Subsidized Stafford Loan while the student is enrolled at least half time, and during a six-month grace period after the student leaves school. The interest rate for 2009-10 is 5.6%. The minimum monthly payment is $50 with up to 10 years to repay the loan. Deferments, forbearance, and loan consolidation are available. You may be charged origination and default fees ranging from 0% to 3%. These are deducted from your total loan amount prior to disbursement.
Unsubsidized Stafford Loan
This is a federal loan for students who do not qualify, in whole or in part, for a Subsidized Stafford Loan. Eligibility for this loan is not based on financial need or family income, but a student must submit a Free Application for Federal Student Aid (FAFSA) to be eligible.
"Unsubsidized" means that the federal government does NOT pay the interest on the loan. Students are charged interest while they are enrolled in school. Unsubsidized Stafford Loans have the same loan terms as Subsidized Stafford Loans (monthly payments, deferments, etc.). However, the interest rate is 6.8%. If a student is not eligible for a full Subsidized Stafford Loan, the student may have an Unsubsidized Stafford Loan listed on his award letter. See table below for annual loan limits.
Stafford Loan Processing
Stafford Loan processing (subsidized and unsubsidized) is done using the Master Promissory Note (MPN). The MPN is a legal document signed by a student and the lender. When you borrow a Stafford Loan for the first time, you must choose a lender/bank and complete the Stafford MPN.Here are some tips to keep in mind when selecting a lender to process your loan.
Annual Loan Limits for Subsidized and Unsubsidized Stafford Loans as of July 1, 2009
| Dependent Undergraduate Student | Independent
Undergraduate Student* |
Graduate Student | |||
| Freshmen (up to 24 credits) |
$5,500 (only $3,500 of this amount may be in subsidized loans) |
$7,500 (only $3,500 of this amount may be in subsidized loans) |
First to Fourth Years | Up to $20,000 (only $8,500 of this amount may be in subsidized loans) |
|
| Sophomores (25 to 53 credits) |
$6,500 (only $4,500 of this amount may be in subsidized loans) |
$8,500 (only $4,500 of this amount may be in subsidized loans) |
Maximum Total Debt | $138,500 (only $65,500 of this amount may be in subsidized loans) |
|
| Juniors (54 to 83 credits) |
$7,500 (only $5,500 of this amount may be in subsidized loans) |
$10,500 (only $5,500 of this amount may be in subsidized loans) |
|||
| Seniors (84+ credits) |
$7,500 (only $5,500 of this amount may be in subsidized loans) |
$10,500 (only $5,500 of this amount may be in subsidized loans) |
|||
| Maximum Total Debt | $31,500 as a dependent undergraduate student (only $23,000 of this amount may be in subsidized loans) |
$57,500 as an independent undergraduate student (only $23,000 of this amount may be in subsidized loans) |
* or a dependent student whose parent applied for but was unable to get a PLUS loan.
Federal PLUS (Parent) Loan
“PLUS” stands for Parent Loan for Undergraduate Students. This is a federal loan for parents of dependent undergraduate students. Eligibility for this loan is not based on financial need or family income. The maximum loan amount is the total cost of attendance minus other financial aid the student may receive. The interest rate on a PLUS loan is fixed at 8.5% for the life of the loan. Repayment begins within 60 days after the full disbursement. For loans first disbursed after July 1, 2008, parents may choose to defer payment until six months after the date the student ceases to be enrolled half time. They may also choose to pay accruing interest monthly or quarterly, or allow the interest to be capitalized quarterly. The PLUS Loan is based on credit approval, and the parent must apply for credit approval each year on UW-Parkside's website. If the parent is borrowing a PLUS for the first time, then following credit approval, the parent must choose a lender/bank and complete the PLUS Master Promissory Note (MPN). The MPN is a legal document signed by the parent and the lender/bank. If credit for a PLUS Loan is denied, the student may then become eligible for additional Unsubsidized Stafford Loan. Here are some tips to keep in mind when selecting a lender to process your loan.
Federal Perkins LoanA Federal Perkins Loan is a low-interest, fixed rate (5%) loan offered to a limited number of students who show exceptional financial need and who file their Free Application for Federal Student Aid (FAFSA) before the priority deadline of March 15. Federal Perkins Loans are made through the University acting as the lender. All interest on a Perkins Loan is paid by the federal government while the student is in school, attending at least half time. Payments on this loan begin nine months after the student graduates, leaves school, or fails to enroll as a half time student. A student has up to 10 years to repay this loan.
An entrance counseling session and a promissory note will be required of all first time Perkins Loan borrowers. These sessions are completed online at: https://www.ecsi.net/promr9/
Alternative Loan Programs
Alternative Student Loans can provide additional funds only after students have applied for federal financial aid through the Free Application for Federal Student Aid (FAFSA). Unlike the Federal Loan Programs (Stafford, Perkins, PLUS), Alternative Loans are not regulated by Federal Financial Aid regulations, therefore, banks will set their own interest rates and conditions of the loan. These interest rates may be high and there may be expensive loan fees.
Things to keep in mind when applying for alternative loans:
- You should first apply for federal financial aid using the FAFSA. An alternative loan will be certified ONLY after you have been offered and have accepted or declined your financial aid offer; this assures you'll receive the best aid package possible.
- The amount of alternative loan you can receive is limited to the cost of attendance minus other aid.
- Interest accrues on alternative loans from the date of disbursement, although actual repayment does not begin until 6 months after the student graduates, or in some cases, drops below half-time status.
- All alternative student loans are based on credit history and most require a credit-worthy co-signer if the student has little or no credit history. All borrowers are encouraged to have a co-signer. It may help reduce interest rates and processing fees, and it improves the chances the loan will be approved.
- Many alternative loan programs require the student to meet UW-Parkside's Satisfactory Academic Progress Standards.
- Each loan program offers various repayment incentives to consider.
If you'd like to learn more about alternative loans, click here.
