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A Generation Hobbled by the Soaring Cost of College - New York Times
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The number of students is much higher than most people think. Rough estimates show that two-thirds of students take out loans for college. The New York Times, however, conducted an analysis that concluded that 94% of students who earn a bachelor’s degree borrow. That’s up from just 45% in 1993. Only 7% of students at public colleges and universities graduate without borrowing while only 5% of grads at private schools can pull off this feat. The average debt is $23,300, but 10% of students borrow more than $54,000 and 3% borrow more than $100,000. Even with scholarships and financial aid, it's likely many will end up in this category.
While there are many questions and answers in this section, often the solution will be the next step in your loan process. However, as a reference point, we're here.
Basic Eligibility Criteria
Our general eligibility requirements are that you must
demonstrate financial need (for most programs);
be a U.S. citizen or an eligible noncitizen;
have a valid Social Security number (with the exception of students from the Republic of the Marshall Islands, Federated States of Micronesia, or the Republic of Palau);
be registered with Selective Service, if you’re a male (you must register between the ages of 18 and 25);
be enrolled or accepted for enrollment as a regular student in an eligible degree or certificate program;
be enrolled at least half-time to be eligible for Direct Loan Program funds;
maintain satisfactory academic progress in college or career school;
sign the certification statement on the Free Application for Federal Student Aid (FAFSA®) stating that
you are not in default on a federal student loan and do not owe money on a federal student grant and
you will use federal student aid only for educational purposes; and
show you’re qualified to obtain a college or career school education by
having a high school diploma or a recognized equivalent such as a General Educational Development (GED) certificate;
completing a high school education in a homeschool setting approved under state law (or—if state law does not require a homeschooled student to obtain a completion credential—completing a high school education in a homeschool setting that qualifies as an exemption from compulsory attendance requirements under state law); or
enrolling in an eligible career pathway program and meeting one of the "ability-to-benefit" alternatives described below.
What types of federal student loans are available?
The U.S. Department of Education has two federal student loan programs:
The William D. Ford Federal Direct Loan (Direct Loan) Program is the largest federal student loan program. Under this program, the U.S. Department of Education is your lender. There are four types of Direct Loans available:
Direct Subsidized Loans are loans made to eligible undergraduate students who demonstrate financial need to help cover the costs of higher education at a college or career school.
Direct Unsubsidized Loans are loans made to eligible undergraduate, graduate, and professional students, but in this case, the student does not have to demonstrate financial need to be eligible for the loan.
Direct PLUS Loans are loans made to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other financial aid.
Direct Consolidation Loans allow you to combine all of your eligible federal student loans into a single loan with a single loan servicer.
The Federal Perkins Loan Program is a school-based loan program for undergraduates and graduate students with exceptional financial need. Under this program, the school is lender.
If you have questions about Perkins Loan eligibility, please contact your school's financial aid office.
How much money can I borrow in federal student loans?
If you are an undergraduate student:
Up to $5,500 per year in Perkins Loans depending on your financial need, the amount of other aid you receive, and the availability of funds at your college or career school.
$5,500 to $12,500 per year in Direct Subsidized Loans and Direct Unsubsidized Loans depending on certain factors, including your year in college.
If you are a graduate student:
Up to $8,000 each year in Perkins Loans depending on your financial need, the amount of other aid you receive, and the availability of funds at your college or career school.
Up to $20,500 each year in Direct Unsubsidized Loans.
The remainder of your college costs not covered by other financial aid in Direct PLUS Loans. Note: A credit check is required for a PLUS loan.
If you are a parent of a dependent undergraduate student:
The remainder of your child’s college costs that are not covered by other financial aid. Note: A credit check is required for a parent loan (called a PLUS loan).
Remember, you can borrow less than your school offers you. You should only borrow what you need.
Why should I take out federal student loans?
Federal student loans are an investment in your future. You should not be afraid to take out federal student loans, but you should be smart about it.
Federal student loans offer many benefits compared to other options you may consider when paying for college:
The interest rate on federal student loans is almost always lower than that on private loans—and much lower than that on a credit card!
You don’t need a credit check or a cosigner to get most federal student loans.
You don’t have to begin repaying your federal student loans until after you leave college or drop below half-time.
If you demonstrate financial need, you can qualify to have the government pay your interest while you are in school.
Federal student loans offer flexible repayment plans and options to postpone your loan payments if you’re having trouble making payments.
If you work in certain jobs, you may be eligible to have a portion of your federal student loans forgiven if you meet certain conditions.
What should I consider when taking out federal student loans?
Before you take out a loan, it’s important to understand that a loan is a legal obligation that you will be responsible for repaying with interest. You may not have to begin repaying your federal student loans right away, but you don’t have to wait to understand your responsibilities as a borrower.
Be a responsible borrower.
Keep track of how much you’re borrowing. Think about how the amount of your loans will affect your future finances, and how much you can afford to repay. Your student loan payments should be only a small percentage of your salary after you graduate, so it’s important not to borrow more than you need for your school-related expenses.
Research starting salaries in your field. Ask your school for starting salaries of recent graduates in your field of study to get an idea of how much you are likely to earn after you graduate. You can use the U.S. Department of Labor's Occupational Outlook Handbook to estimate salaries for different careers or research employment opportunities advertised in the area where you plan to live to get an idea of a local starting salary. You also can use the Department of Labor's career search tool to research careers and view the average annual salary for each career.
Understand the terms of your loan and keep copies of your loan documents. When you sign your promissory note, you are agreeing to repay the loan according to the terms of the note even if you don’t complete your education, can’t get a job after you complete the program, or you didn’t like the education you received.
Make payments on time. You are required to make payments on time even if you don’t receive a bill, repayment notice, or a reminder. You must pay the full amount required by your repayment plan, as partial payments do not fulfill your obligation to repay your student loan on time.
Keep in touch with your loan servicer. Notify your loan servicer when you graduate; withdraw from school; drop below half-time status; transfer to another school; or change your name, address, or Social Security number. You also should contact your servicer if you’re having trouble making your scheduled loan payments. Your servicer has several options available to help you keep your loan in good standing.
How do I get a federal student loan?
To apply for a federal student loan, you must complete and submit a Free Application for Federal Student Aid (FAFSA®). Based on the results of your FAFSA, your college or career school will send you a financial aid offer, which may include federal student loans. Your school will tell you how to accept all or a part of the loan.
Before you receive your loan funds, you will be required to
complete entrance counseling, a tool to ensure you understand your obligation to repay the loan; and
sign a Master Promissory Note (MPN), agreeing to the terms of the loan.
Contact the financial aid office at the school you are planning to attend for details regarding the process at your school.
Is the U.S. Department of Education responsible for HEAL Program loans?
Yes. On July 1, 2014, the Health Education Assistance Loan (HEAL) Program was transferred from the U.S. Department of Health and Human Services (HHS) to the U.S. Department of Education (ED). However, it is no longer possible to obtain a new HEAL Program loan. The making of new HEAL Program loans was discontinued on September 30, 1998.
Before it was discontinued, the HEAL Program insured loans made by participating lenders to eligible graduate students in schools of medicine, osteopathy, dentistry, veterinary medicine, optometry, podiatry, public health, pharmacy, chiropractic, or in programs in health administration and clinical psychology. ED is responsible for managing the servicing of nondefaulted HEAL Program loans and the collection of defaulted HEAL Program loans that remain.
Borrowers who have HEAL Program loans and members of the community may obtain more information as outlined below.
If you have HEAL Program loans and are not in default on those loans, contact your loan servicer for help with account-related questions. Use the contact information your loan servicer provided to you.
If you have HEAL Program loans and are in default on those loans, contact the Debt Collection Center for help with account-related questions: