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With college costs on the rise, many facing the choice to go to college also have to consider taking out student loans in order to pay for it.  The following looks at various options.  Be sure to contact the college financial aid office for additional assistance. 

Before you begin the loan process, look into sites such as Finaid.org or Collegeboard.com to look for scholarships and grants.  Since these don't have to be paid back, it's "free" money.  Another option to explore is grants in exchange for service, such as Teach for America. 

Since government loans are fixed rate, be sure to check these options out before looking into private loans.  Discuss your needs with your bank or credit union.  Even if they don't offer student loans, they may be able to guide you to reputable lenders.

Students interested in receiving federal student aid should continue to complete a Free Application for Federal Student Aid (FAFSASM) for each school year that they wish to be considered for aid. If you have any questions about applying for federal student aid, please contact 1-800-4-FED-AID.

Federal Stafford Loans 

For undergraduate students, the U.S. Department of Education administers the Federal Family Education Loan Program and the William D. Ford Federal Direct Loan Program. Both programs offer Stafford Loans.


  • No credit history check
  • Available to almost everyone
  • No co-signors needed
  • Depending on your family's income, the government may pay the interest (subsidize) while you are in school and during the six-month period after you leave school. To find out if you qualify, use the calculator at FAFSA4caster. This tool also can help you gather income information needed to fill out the Free Application for Federal Student Aid, or FAFSA.
  • Congress sets the interest rate. The current subsidized rate is 3.4%. Unsubsidized loans have a current fixed rate of 6.8%.

Things to consider:

  • If you qualify for a subsidized loan, the federal government pays the interest on the loan until you begin repaying it.  If you don't qualify for a subsidized loan, that means your unsubsidized loan will charge interest from the time you first receive the funds until it is paid off, so interest will accrue even if you don't begin paying it off until after graduation.  
  • Congress sets a limit on the amount of money you can borrow each year of school. The limits, which are the lowest when you are a freshman, increase each year. For a list of the loan limits, go to the U.S. Department of Education's Student Aid on the Web at StudentAid.ed.gov
  • Loan money can be used for education expenses like tuition, books and dorm room costs — but not your personal credit card bill or other expenses.
  • You get six months after leaving school before you have to start paying back the loans.
  • You have between 10 and 25 years to pay them back, depending on which repayment plan you choose.

Federal Perkins Loans 

These are low-cost, government-guaranteed loans that colleges issue to low-income students to cover education costs.


  • Both full-time and part-time students who demonstrate great financial need are eligible.

  • The interest rate is 5%, which is usually lower than other loans.

  • You can borrow up to $5,500 a year as an undergraduate, depending on your level of need.

  • You get up to 10 years to pay the loans back.

  • Interest is paid by the federal government while you're in school and during a nine-month grace period.

Things to consider:

  • Not everyone is eligible.

  • The amount you receive depends on your financial need, amount of other aid you receive, and loan money available at your school. Since each school has a different amount of Perkins money to lend out, each school has a different definition of a financial need.

  • Not all colleges participate in this loan program.

  • Your first loan payment is due nine months after you graduate.

State Loans


  • You don't have to attend a state school to qualify.

  • Most states offer these loans.

Things to consider:

  • The names of the loans may vary from state to state, so they may be hard to research. 

  • Repayment is similar to federal payback standards, including a grace period.

  • Applying for state loans is often done through your school. Information on state money is usually included in your financial aid package. Ask your student loan or financial aid officer for information, or visit your state's higher education website.  

Private Loans


  • Banks or credit unions may offer them.

  • You can use the funds for whatever education needs you have, including transportation, housing, books or a computer.

  • There are no application deadlines, so the loans can be requested at any time.

  • You get the money quickly, sometimes within a few days.

Things to consider: 

  • There are some shady private lenders, so do the extra research to make sure you're working with a lender you can trust. Before signing the paperwork, understand the terms of the loan. Ask for detailed charts so you know exactly what you're agreeing to.

  • Your eligibility and interest rate varies based on your credit score.

  • You can't refinance or combine your private and government loans into one loan with one payment. Government loans are combined, or consolidated, separately from private loans, which means you'll have at least two loan bills if you've borrowed from both sources.

  • You can't put off the payback of some loans, so you'll make payments while you're still in school. If you attend graduate school or don't have a job, you may be granted deferment or a temporary stop in repaying the loans. In most cases with private loans, interest will continue to accrue and increase the total cost of your loan.

  • It pays to be on time. Private loans have repayment incentives, such as signing up to have your payments automatically deducted from an account, which can shave up to one-half of a percentage point off the interest you have to pay on a loan. 

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