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Student and Parent Loan Comparison

Federal Direct Stafford Loan Federal Direct PLUS Loans Private Alternative Loans
Responsible Party: Student Parent or Graduate Student Student or Parent
Co-Signer: No co-signer requirement No co-signer requirement unless an endorser is needed(as a result of denied credit) Required in most cases(as a result of denied or insufficient credit)
Interest Rate and Rate Caps: Fixed rates for Loans first disbursed on or after 7/1/16 and before 7/1/17: Subsidized and Unsubsidized for Undergraduates, 3.76% Graduates Unsubsidized 5.31%. Fixed rates for Loans first disbursed on or after 7/1/16 and before 7/1/17: 6.31%. Same rate for all credit approved borrowers. Variable rate set quarterly or monthly or fixed. Rate usually depends on credit score and determined by lender.
Accrued Interest: Accrued interest capitalizes once at repayment on unsubsidized loans; subsidized loans do not accrue interest while the student is in school and during the grace period Accrued interest capitalizes once at repayment Accrued interest may be capitalized monthly, quarterly, or once at repayment
Origination Fees(“up front” fees): For loans with a first disbursement on or after 10/1/16 and before 10/1/17: 1.069% For loans with a first disbursement on or after 10/1/16 and before 10/1/17: 4.276% Depend on loan product and determined by lender.
Approval Criteria: Credit checks are not done for these loans, so a student’s credit is not a factor. Credit check based on federal standards; No debt-to-income ratios or credit scoring Based on borrower’s (student, parent and/or co-signer) credit history and/or debt-to-income ratio. Usually considers credit scores.
Applying for a Loan: Master Promissory Note is good for 10 years; No annual paperwork to complete Master Promissory Note is good for 10 years; No annual paperwork to complete (unless an endorser is needed) Must re-apply each year for additional funds
Annual Borrowing Limits: Between $5,500 and $20,500 depending on grade level and dependency status Up to the cost of education less any financial aid received Borrower’s may borrow up to the full cost of education less financial aid awarded, depending on debt-to-income ratio and co- signer approval
Repayment: Student is responsible. The principal, and interest in the case of a subsidized loan, are deferred until six months after the student ceases at least half-time attendance. Parent or Graduate Student borrower is responsible; Repayment begins 60 days after loan is fully disbursed. May be deferred while the student is in school. Borrower(student, parent and/or co-signer) is responsible; Repayment can be deferred up to six months after leaving school as determined by the lender
Payment Flexibility: Income-sensitive; Graduated and extended repayment options are available Income-sensitive; Graduated and extended repayment options are available Payment options vary by lender
Payment Deferment Situations: Deferment Situations: The federal government offers various repayment plans, deferment and forbearance, and at times loan forgiveness (i.e. canceled) if you meet certain conditions. The federal government offers various repayment plans, deferment and forbearance, and at times loan forgiveness (i.e. canceled) if you meet certain conditions. Limited deferment during unemployment or economic hardship (usually one year maximum); Payment may be deferred while student is enrolled at least half-time
Loan Forgiveness/Cancellation Situations: Death, Disability, Work in certain designated public school service professions Federally insured against death and disability for both the parent and the student Not federally insured; some lenders offer discharge in the event of disability or death
Prepayment Penalty: No prepayment penalty No prepayment penalty No prepayment penalty