Fact About Student Loans

Facts About Student Loans

Federal Loans

All student loans are not the same.
Direct, Perkins, PLUS, etc. are federally funded and regulated. You have to repay these loans, but the terms are generally friendlier than other types of loans.

Perkins Loans

  • Federal loans issued to borrowers directly by the college.
  • Based on need.
  • Fixed, 5 percent interest rate.
  • No payments required while the student is in school.
  • No interest accrues while the student is in school, in an approved deferment or in the grace period.
  • Repayment begins nine months after a student leaves school, graduates or drops to less than half-time attendance.
  • A portion of a student's loan may be canceled in certain cases, such as if he or she teaches at a low-income school following graduation.
  • For more information, visit the campus financial aid office or Perkins Loan officer or go to http://studentaid.ed.gov.

Direct Loans

Direct loans are the most common form of self-help aid for undergraduate, graduate, vocational and professional students. Direct loans are provided and administered by the U.S. Department of Education. They can be separated into two types:

Direct Subsidized Loans

  • Based on need.
  • Fixed interest rate.
    • For undergraduate students with loans disbursed between July 1, 2013 and June 30, 2014, the interest rate is fixed at 6.8 percent.
    • Effective for loans made for payment periods that begin on or after July 1, 2012, graduate and professional students are no longer eligible to receive subsidized loans.
  • No payments required while the student is in school. Interest is paid by the federal government while the student is in college, and during approved deferment periods. However, on loans disbursed on or after July 1, 2012, and before July 1, 2014, borrowers are responsible for the interest that accrues while their loans are in their six-month grace period. Payments are not required, but the interest will be added (capitalized) to the principal amount of the loan when the grace period ends.
  • Repayment begins six months after a student leaves college, graduates or drops to less than half-time attendance.

Direct Unsubsidized Loans

  • In almost all cases, students enrolled at least half time are eligible.
  • Fixed interest rate.
    • For undergraduate and graduate students with loans disbursed between July 1, 2013 and June 30, 2014, the interest rate is fixed at 6.8 percent.
  • Interest starts to accrue immediately upon disbursement and continues throughout the grace period and in approved deferment.
  • Repayment begins six months after a student leaves college, graduates or drops to less than half-time attendance.
  • Interest that is not paid while the student is in school, grace period, deferment, or forbearance will be added to the principal of the loan when he/she enters repayment.

The amount that can be borrowed depends on college costs, expected family contribution, a student's year in school, their enrollment status, how much other financial aid they receive and whether they are dependent or independent.

For more information regarding the Direct Loan Program, please visit www.StudentLoans.gov.

Direct PLUS Loans (Parent Loans for Undergraduate Students)

  • Available to parents of dependent, undergraduate students.
  • Fixed interest rate.
    • For loans disbursed between July 1, 2012 and June 30, 2013, the interest rate is fixed at 7.9 percent.
  • Parent is responsible for the repayment of the loan.
  • Repayment begins 60 days after disbursement of the entire loan amount unless the parent chooses to defer payment.
  • Borrower must meet minimal credit requirements.

These loans have no aggregate limit, meaning a parent can borrow as much as needed to pay for the student's college education.

For more information regarding the Direct PLUS loan program, please visit www.StudentLoans.gov.

Direct Graduate PLUS Loans

  • Available to graduate or professional students.
  • Fixed interest rate.
    • For loans disbursed between July 1, 2012 and June 30, 2013, the interest rate is fixed at 7.9 percent.
  • Student is responsible for repayment of the loan.
  • Repayment begins within 60 days after loan is fully disbursed unless the student chooses to defer payment.
  • Are unsubsidized loans.
  • Borrower must meet credit requirements.

The main purpose of these loans is to supplement federal Stafford loans in amounts up to the cost of attendance less any other financial assistance. Students must have borrowed the full amount of subsidized and unsubsidized federal Stafford loans before becoming eligible for a Grad PLUS loan.

For more information regarding the Direct Grad PLUS loan program, please visit www.StudentLoans.gov.

Private Loans

Private educational loans help bridge the gap between the actual cost of education and the amount the government allows a student to borrow in its programs. Private educational loans are offered by private lenders and borrowers don't need to complete any federal forms. Eligibility for private student loans depend on credit scores with cosigner options available. Private educational loans have variable or fixed interest rates related to an index, such as the LIBOR or PRIME, plus a margin. 

Learn How Interest Rates Work

Tru Student Private Educational Loans have two types of interest rates – fixed and variable. Fixed rates stay the same over the life of the loan, while variable rates adjust based on the Prime rate or Libor.

Fixed rates

  • Remain the same over the life of the loan, keeping monthly payments stable throughout repayment.
  • Allow borrowers to figure out how much total interest they will pay throughout the life of their loan.
  • If interest rates drop after a borrower has already locked in a fixed interest rate, the borrower may need to make higher payments than other borrowers with variable rates for a certain period of time.

Variable rates

  • Often provide a lower initial rate than fixed rate loans.
  • Increase and decrease based on adjustments in the Prime rate or Libor causing changes in a borrower's monthly payment amount.
  • Payments can vary on a monthly basis, which may lead to payments being higher than loans on a fixed rate.