If you had to borrow to finance your college education, it’s likely that you have more than one type of loan. Part of being able to effectively deal with your debt is understanding it. If you’re eligible for any type of loan forgiveness program, it especially pays to know what kind of student loans you have. Some loans lose their forgiveness eligibility if they are consolidated with non-eligible loans. And on the flip side, some consolidations can bring more loans under your forgiveness umbrella. This is truly a case where knowledge is power – financial power anyway…
Here are the primary types of federal student loans that you likely have in your debt portfolio:
Subsidized Stafford Loan
Those with financial need are eligible for these loans but as of 2012, they are available to undergraduate students only. When you’re in school at least half time and during any deferment, the federal government will pay the interest on these loans. Your school will determine how much you can borrow within the federal limits which are:
• Maximum of $23,000
• Maximum of $3,500 in the first year
• Maximum of $4,500 in the second year
• Maximum of $5,500 in the third year and beyond up to the $23k limit
Undergraduate Unsubsidized Stafford Loan
These loans are not based on financial need and are available to most undergraduate and graduate students enrolled at least half time. The total limit of Stafford loans (subsidized and unsubsidized together) is $31,000 but the limits are more complicated for individual unsubsidized Stafford loans. If your financial aid has not exceeded the cost of attendance you can borrow an additional $2,000 each year making these the maximum annual amounts:
• Maximum of $31,000 (including no more than $23k in subsidized debt)
• Maximum of $5,500 in the first year ($3,500 plus the add’l $2,000)
• Maximum of $6,500 in the second year ($4,500 plus the add’l $2,000)
• Maximum of $7,500 in the third year and beyond ($7,500 plus the add’l $2,000) up to the $31k limit
If you need more money for your studies and you or your parents are ineligible for PLUS loans, the maximum for Stafford loans will be increased to $57,500 overall.
Graduate Unsubsidized Stafford Loan
For graduate students, the limits are higher. Again, the limits are more complicated for these loans. If your financial aid has not exceeded the cost of attendance you can borrow an additional $6,000 for the first and second years and then $7,000 for any additional years making these the maximum annual amounts:
• Maximum of $138,500 (including the total of any undergraduate Stafford loans)
• Maximum of $9,500 in the first year ($3,500 plus the add’l $6,000)
• Maximum of $10,500 in the second year ($4,500 plus the add’l $6,000)
• Maximum of $12,500 in the third year and beyond ($5,500 plus the add’l $7,000) up to the $138.5k limit
This type of loan is available to both undergraduate and graduate students, but you must demonstrate “exceptional financial need.” Not all schools participate in the Perkins loan program and it is actually the school itself that is the lender rather than the federal government. You must be enrolled at least half time to be eligible and funds may be limited by the school’s availability of Perkins’ funds to lend. The grace period for Perkins loans is slightly longer at nine months compared to six for Stafford loans. Here are the limits:
• Maximum of $27,500 as an undergraduate – up to $5,500 per year
• Maximum of $60,000 as a graduate student – up to $8,000 per year (this maximum includes any undergraduate Perkins debt)
Parent PLUS Loan
If your parents are willing to put their good names on the line, they can borrow to pay for your school as well. Parents of natural, adoptive or step-children as well as legal guardians can apply for PLUS loans. The borrower must not have any recent adverse credit history (within the past five years). These loans are not need-based. The maximum amount of these loans is the cost of attendance (tuition, room, board, books, fees, etc) less any other financial aid you have received.
Grad PLUS Loan
You can use a Grad PLUS Loan on your own behalf if you are found to be credit worthy. You may require a cosigner! The only limit on these loans is like with parent PLUS loans which is that you can borrow the total cost of your education less any other financial aid that you receive.
Tuition.io can help you get this all sorted out so you have an understanding of your debt and figure out the best strategy to use to eliminate it, get more affordable repayments or pursue forgiveness. Sign up here for our free student loan management and optimization tool and be sure to check out our Student Loan Help Center for more in-depth information on all things student loan related!