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Home » Student Resources » High School Students » Finance FAQ’s

Finance FAQ's

What is the difference between a federal loan and private loan?

A federal loan is a loan from the US Department of Education. This category includes the William D. Ford Direct Loan Program and the Federal Perkins Loan.

Within the William D. Ford Direct Loan Program there are two main types of loans. There is the Stafford Loan for undergraduate students and the DirectPLUS loan for parents of students who file taxes as dependents.

The Federal Perkins Loan is for undergraduate and graduate students.

Private loans are given by private lending institutions, such as banks.

What do I need to know about interest?

Whether you are taking out a federal or private loan, it is very important to find out what your interest rate will be. Interest is described in percents- for example, the DirectPLUS loan for parents of students has a fixed interest rate of 8.5%. This means that the interest rate will not change from year to year.

Private lending institutions usually offer loans with a variable interest rate. This means that the interest rate can go up from year to year. Be sure to find out before signing any loan documents what your interest rate will be and how long you will have to repay your loan. This will allow you to make an informed decision about how much money to borrow and plan ahead for the future after graduation.

A good rule of thumb is not to borrow more than you expect to make the year after your graduation. If your loan total is less than your first year’s salary, it is unlikely you will have to make monthly payments at higher than 10% of your income. (http://www.forbes.com/2009/04/22/student-loans-moneybuilder-personal-finance-loans.html)

How can I calculate how much money I will end up paying on a loan?

Many lending institutions offer free online calculators to help parents and students estimate the cost of college including loan repayment. Bank of America has a loan calculator here.

What is the difference between a scholarship, a grant and a loan?

A loan is money that has to be paid back to the lending institution, including any accumulated interest. Scholarships and grants do not have to be repaid.

How can I find the total cost of college?

Net price calculators- tools to allow students to easily tally up the total cost of attending college- are an easy way to find that final number. FIU offers a complete net price calculator here.

What is the different between a federal unsubsidized and subsidized loan?

Subsidized loans are a loan with better terms than an unsubsidized loan. Most importantly, interest on a subsidized loan does not accumulate from the date of disbursement. The government pays this interest on behalf of the student until they graduate and for a six month “grace period” after graduation. At that point, the student takes over paying interest on the loan.

In unsubsidized loans, interest accumulates from the date you receive the funds. The long term effect is that you pay back more money on an unsubsidized loan.

Who is eligible for a federal student loan?

Any US citizen or eligible non-citizen who is enrolled part or full time in college and demonstrates a financial need. You do not need a credit history or a co-signer for federal student loans.

What is a loan deferment?

In times of temporary financial hardship, loans can be deferred. A loan is deferred for an amount of time set by the lending institution during which you do not need to make payments. Interest may or may not be assessed during the deferment period, depending on the type of loan you have. For example, direct subsidized loans from the Department of Education do not accumulate interest during a deferment.

What does disbursement mean?

Disbursement is just another word for receiving the money of your loan in your account. If you have a federal loan, your school’s financial aid department is responsible for disbursing the money into your account. If you have a private loan, the bank will disburse the money into your account.

Who can help me with filling out my FAFSA?

¡HACER! holds workshops for students who need help filling out their FAFSA. Visit our calendar of events to find out about upcoming workshops.

Our partners UAspire and SingleStopUSA both offer free financial aid counseling and FAFSA assistance.

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