About 40% of SIPA students use student loans as part of their financing strategy, and there are a number of options available to them. Most borrow fixed rate loans from the federal government, which offer flexible repayment options. Most federal loans are not credit-based, but have annual limits to the amount that can be borrowed; the Graduate PLUS loan is the exception to both of these rules. But other credit-based loans are available from private lenders, some of which may be available to international students so long as they have a US citizen who can co-sign the loan for them.
For students who are US citizens, permanent resident aliens, or political refugees, the federal government makes a number of loan programs available that students can use, if necessary, to fund the full cost of their education, including living expenses. In order to be considered for any loan from the federal government, a student must complete the Free Application for Federal Student Aid, or FAFSA. There are three different federal loan programs available to graduate students. They are:
- The Unsubsidized Federal Direct Loan (a/k/a Stafford Loan); currently at 6.8% interest, which accumulates during enrollment (hence “unsubsidized”, Congress eliminated the interest subsidy to graduate students starting 7/1/12). While you are enrolled, you will have the option of paying your interest (less expensive long-term option) or capitalizing the interest (adding it to the principal). Unsubsidized Direct Loans are available for up to $20,500 per academic year. Visit www.studentloans.gov for more information.
- The Federal Graduate PLUS Loan; currently at 7.9% interest, and like the Unsubsidized Direct Loans, interest will be accumulating during your enrollment. The Graduate PLUS Loan can cover the full difference between your total cost of attendance (which includes tuition, fees, books) minus other aid or loans received, but unlike other student loans available from the federal government, the Graduate PLUS loan is credit based. For more information, visit studentloans.gov or click here.
- The Federal Perkins Loan; offered at 5% interest, which is fully deferred while you are enrolled. Perkins Loans are only available to a limited number of students, based on financial need. Annual loan amounts typically range between $2,000 and $6,000; for more information, click here.
There are also loans available from private lenders. Private loans do not require completion of the FAFSA, and some are available to international students who have a US citizen who can co-sign the loan form them (click here for some loans available to international students). Most private loans do not have strict annual limits and can be borrowed for the full cost of attendance minus other aid. At this time, interest rates tend to be lower than those of federal loans, but federal loan interest rates are fixed, and private loans (which are much less regulated) are variable. Private loans also tend to offer borrowers less flexibility and fewer features during repayment than federal loans. All students are free to select their own loan products and lenders, but due to repayment flexibility and the certainty of fixed interest rates, most SIPA students have opted to use federal loans.
In a future blog post, we will discuss student loan repayment; there are many repayment options available for federal loans that can make your student loans manageable, even one that could forgive some of your indebtedness.