In the early 17th century, Shakespeare coined the phrase "neither a borrower nor a lender be" in his play "Hamlet." But back then, there was no way the Bard could have predicted the astronomical cost of today's higher education. In the early 21st century, unless you've got a spectacular trust fund or you scored a full scholarship ride, there's no way you're getting through postsecondary school without a little help from Uncle Sam.
That's where an Education Loan comes in. Read on for what to know before you borrow.
Apply Yourself
It all starts with the Free Application for Federal Student Aid (FAFSA), which determines your federal student aid eligibility. You may complete the FAFSA online at www.fafsa.ed.gov between January and June; if you have questions along the way, call the Federal Student Aid Information Center at 1-800-FED-AID.
Get to Know the Loans
There are three types of federal loans available:
Perkins Loan: Interest charged on this federal loan is 5 percent for both undergraduate and graduate students; you'll need to repay your school within 10 years. Annual award limits are $4,000 for undergrads and $6,000 for grad students.
Stafford Loan (Direct or FFEL; subsidized or unsubsidized): You must be at least a half-time student to qualify for a Stafford Loan. You'll need to repay your loan within 25 years at a fixed rate of 6.8 percent if the loan was first disbursed on or after July 1, 2006. Annual award limits are $3,500 to $20,500 depending on grade level and dependency status.
PLUS Loan (Direct or FFEL): This unsubsidized education loan is now available to graduate and professional degree students; financial need is not a requirement. The loan needs to be repaid within 25 years at a fixed interest rate of 7.9 percent (for Direct Loans) or 8.5 percent (for FFEL Loans) if the loan was first disbursed on or after July 1, 2006. The maximum loan amount is the cost of attendance minus any other financial aid you receive.
Learn These Terms
Direct Loan: The lender is the U.S. Department of Education (DOE).
Federal Family Education Loan (FFEL): The lender is a bank, credit union, or other participating private lender providing funds guaranteed by the federal government.
Subsidized Loan: The DOE will pay (subsidize) the interest that accrues while you're in school and during grace and deferment periods. You must demonstrate financial need to receive a subsidized federal loan.
Unsubsidized Loan: You're responsible for all interest accrued during the life of the loan. Financial need is not a requirement to obtain an unsubsidized federal loan.
Education loans are also available through private lenders such as Citibank or Wells Fargo. Visit the lender's Web site for information on how to apply, interest rates, and repayment terms.
If you're apprehensive about making the education loan leap, remember this: The loan enables you to get the degree, which enables you to land the job, which enables you to earn the salary, which enables you to repay the loan, which enables you to get back in the black and earn a living doing what you love.
Isn't it worth the investment?
About the author:
Robyn Tellefsen is a frequent contributor to The CollegeBound Network. Learn more about finding a school that's right for you.
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