- What are Student Loans?
Student loans are money borrowed to assist in paying for education costs like tuition, books, living costs, and supplies. Though scholarships or grants are not repaid, loans are paid back with interest.
- Types of Student Loans
A. Federal Student Loans (Government Loans)
These are government-funded loans and are in most cases better for students.
Direct Subsidized Loans
For undergraduate students with financial need.
Government pays interest while you are in school at least half-time.
Direct Unsubsidized Loans
For undergraduate, graduate, and professional students.
Interest is charged from the date of loan disbursement.
PLUS Loans (Graduate or Parent)
For parents of professional/graduate students or undergraduates.
Requires credit check.
Perkins Loans (Discontinued in most cases, but still in repayment for some)
B. Private Student Loans
Available from banks, credit unions, or online banks.
Often require a co-signer.
Interest rates and terms are based on lender and credit.
More restrictive payment and forgiveness plans.
- How to Apply for Student Loans
A. Federal Loans
Fill out the FAFSA at https://studentaid.gov
Runs each year on 1st October.
Required for federal aid eligibility.
Check the Student Aid Report (SAR)
Accept Your Loans at your school’s financial aid office.
B. Private Loans
Compare and research lenders (interest rate, repayment, and fees).
Use direct application via lender’s website.
May require a co-signer if you have no or bad credit history.
Lender deposits money in your school (disbursement).
- Interest Rates (Forecast for 2025)
Federal Undergraduate Loan: ~5.5%
Federal Graduate Loan: ~7.05%
Federal PLUS Loan: ~8.05%
Private Loans: 4% to 15%+, fixed or variable
- Loan Limits
Loan Type\tAnnual Limit\tAggregate Limit
Federal Subsidized/Unsubsidized (Dep. Undergrad) $5,500–$7,500 $31,000
Federal Subsidized/Unsubsidized (Indep. Undergrad) $9,500–$12,500 $57,500 Graduate Loans
$20,500/year
$138,500 (total with undergrad loans) - Repayment Options
Federal Loan Repayment Plans:
Standard Plan – Equated monthly installments of 10 years
Graduated Plan – The payments start low and increase every two years
Long-Term Plan – 25 years or more
Income-Driven Repayment (IDR) – Based on your income and family size (SAVE, PAYE, REPAYE, IBR)
Public Service Loan Forgiveness (PSLF) – Forgiveness after 10 years of qualifying payments for public service employees
Private Loan Repayment
Less flexible
Usually no forgiveness programs
Choices vary by lender
- Deferment and Forbearance
Deferment: Postpone payments without paying interest (for subsidized loans).
Forbearance: Postpone or reduce payments, interest still accrues.
- Loan Forgiveness & Discharge Options
Public Service Loan Forgiveness (PSLF)
Teacher Loan Forgiveness
Total and Permanent Disability Discharge
Closed School Discharge
Borrower Defense to Repayment
- Advantages and Disadvantages of Student Loans
Pros:
Access to education
Fixed interest (federal)
Flexible repayment facilities
Forgiveness options
Cons:
Can result in excessive borrowing
Has to be returned with interest
Private loans offer fewer safeguards
- Tips Before Borrowing
First apply for grants and scholarships
Borrow just the amount you need
Understand interest rates and terms. Consider career earning potential versus debt Create a repayment plan before graduation