A college education has become a significant expense for most families and requires careful planning. Whatever your financial situation is, we encourage you to use this information to help you understand college funding so you can navigate the financial aid process with greater ease.
Student loans, unlike grants and work-study, are borrowed money that must be repaid, with interest, just like car loans and mortgages. You cannot have these loans canceled because you didn’t like the education you received, didn’t get a job in your field of study or because you are having financial difficulty.
Federal loan programs change occasionally so for the most up to date information about federal loan programs and other federal student financial aid programs you should visit the U.S. Department of Education’s website at
The U.S. Department of Education has two federal student loan programs:
Perkins Loans are low-interest (5 percent) loans for undergraduate, graduate and professional students with financial need. These loans are offered through a participating school’s financial aid office, and the school acts as the lender. Up to $5,550 may be borrowed for each year of undergraduate study, while up to $8,000 may be borrowed for each year of graduate or professional study.
Direct Subsidized Loans are low-interest, need-based loans made to undergraduate, graduate and professional students attending school at least halftime. Interest is paid by the federal government while the borrower is attending school, during the six-month grace period and during specific loan deferment periods. Repayment begins six months following a borrower’s graduation or when the borrower ceases to be enrolled at least halftime.
Direct Unsubsidized Loans are low-interest, non-need-based loans made to undergraduate, graduate and professional students attending school at least halftime. Borrowers are responsible for all interest accrued on unsubsidized loans from the date the loan is disbursed, including the time that the borrower attends school, during the grace period and during periods of deferment. Repayment begins six months following the borrower’s graduation or when the borrower ceases to be enrolled at least halftime.
Direct PLUS Loans are made to parents of dependent undergraduate students and to graduate or professional students. These loans are not based on financial need. The amount that can be borrowed depends on the school’s cost of attendance and any other financial aid that the student may receive, including other loans. Applicants with unfavorable credit histories are usually not eligible for a PLUS loan.
Borrowers are responsible for all interest accrued on PLUS loans from the date the loan is disbursed, including the time the borrower or student attends school, during the grace period and during periodsof deferment. Graduate and professional students must have appliedfor the annual loan maximum eligibility under both the Direct Subsidized Loans and Direct Unsubsidized Loans programs before applying for a graduate or professional PLUS loan. Repayment varies depending on the type of PLUS loan awarded and the loan’s disbursement date.
Two tax credits help offset the costs (tuition, fees, books, supplies, equipment) of college or career school by reducing the amount of your income tax:
For More Information
IRS Help Line
IRS Publication 970, Tax Benefits for Higher Education
www.irs.gov or consult your tax adviser.