Story by Maryville University
Acceptance into college is a happy time with students breathing a sigh of relief that they got their first choice, maybe second or even that they’re going at all. Maybe a student is pursuing a dream that doesn’t just involve textbooks and term papers, but pots and pans in culinary school. But with the decision to pursue a culinary education comes the question of how to pay for it.
According to statistics, some 20 million Americans go to college each year and about 12% of them — or about 2.4 million — pay their tuition through borrowing. Student loan options are plentiful and one of the most common choices is an unsubsidized federal direct loan. Another option for parents borrowing on behalf of their child in college is the Parent PLUS Loan.
What is an unsubsidized federal Direct loan?
An unsubsidized federal direct loan is an option for college students to cover the cost of tuition at a variety of schooling paths: four-year college or university, a community college or junior college, trade, career or technical school (i.e. financial aid for culinary school). The loan comes from the U.S. Department of Education for schools and students that are eligible.
Just like any loan, the money must be paid back but an unsubsidized loan begins to accrue interest while the student is still in college. Subsidized loans, on the other hand, don’t collect interest during that period because the government pays the interest.
How do I get an unsubsidized federal Direct loan?
While some loan programs depend on the student’s income, unsubsidized loans can be borrowed depending on how much money a student makes. Unsubsidized loans can also be used for the undergraduate and graduate level; there is no time limit in place for how long college students can get an unsubsidized loan.
You can receive an unsubsidized federal Direct loan each academic year.
To be an eligible borrower, a student needs to:
? Enroll at least half-time in a degree or certificate program at a school that is participating in the Direct Loan program
? Complete and file the Free Application for Federal Student Aid (FAFSA). Your school will use this information to determine how much you could receive from the Direct Loan program.
How much can I get through an unsubsidized federal Direct loan?
The annual loan limits are:
? Freshman Year: No more than $5,500
? Sophomore Year: No more than $6,500
? Junior or Senior Year: No more than $7,500
? Professional or Graduate Student: No more than $20,500
What about a Parent Direct Plus Loan?
There are options for parents to take out Direct loans to pay for their children’s college education. To be eligible to secure a Parent Plus loan, the parent must:
? Be the parent (whether biological, adoptive or step parent) of a dependent undergraduate student who is enrolled at least half-time at a school that is participating in the Direct Loan program.
? Have a child who completes and files a FAFSA.
? Have a child who meets the bare minimum for financial need.
? Have a cosigner who is not the student if they have a bad credit history.
What if my parents can’t get a Direct Plus Loan and I need more money?
Students whose parents are denied the Parent Plus loan may be eligible to receive an additional funds from an unsubsidized federal Direct loan.
When do I have to pay an unsubsidized federal Direct loan back?
The first thing to understand is that if you take out a loan, you will have to pay it back. An unsubsidized federal Direct loan is not a scholarship, grant or gift for which you are no longer responsible.
You can start repaying your loan when the payment is fully disbursed and that can be either after the academic year you needed the loan or, if you needed loans during your entire school career, after graduation. However, you may place your repayment on deferment for six months after you stop going to school at least half-time.
Is this loan a good option?
If you thoroughly research your options and make solid plans for repayment, the unsubsidized federal Direct loan can be a sound choice to help finance your education.
If you still need more information
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