Student Loan Network FAQs
- After grants and scholarships, how should I prioritize my educational financing options?
- Which student loan programs are best?
- How do I choose an alternative loan program?
- What’s the difference between deferment and forbearance?
- Why is the amount of my student disbursement less than I was awarded by the school?
- How is my EFC calculated?
- Why do some schools use an EFC that differs from what my Federal EFC (on my SAR) says?
- How do I manage the difference between the school's cost and the amount of financial aid I was awarded?
- What should I do if my family circumstances changed since submitting my financial aid applications?
- How do I choose a college?
- Whom do I contact for questions about my Direct Student Loan?
After grants and scholarships, how should I prioritize my educational financing options?
The good news is there are many financial aid options. You should first consider options that require the least amount of interest, finance or other charges. At the same time, you relate the amount of these options to your financial circumstances and understand that the options with lower/lowest charges often have more demanding payment schedules.
Which student loan programs are best?
The three most common types of loans are the Stafford Loan, the PLUS Loan (including the Grad PLUS Loan) and alternative student loans. While there are no absolute ways to determine which student loan programs are best, there are some general guidelines and areas that will help to help you choose the most affordable loan option.
- Interest Subsidy — Subsidized loans (in which the government or other agency) are far better than unsubsidized loans (in which interest must be paid by the borrower from the loan's disbursement).
- Lowest Cost — The loan's interest rates and fee structure determine the amount of a loan's finance charges. Some loans (like mortgages) allow you to pay up-front fees in exchange for a lower interest rate. You should consider this feature in relation to how long you plan to repay the loan. The loans with a longer repayment period are often less expensive with lower interest charges and a slightly higher up-front fee.
- Interest rate options — Programs offer different interest rate options. Some are fixed and stay the same over the life of the loan. Some are variable and tied to the Prime interest rate (or other index). When the interest rate changes also varies among programs. Some change annually, some quarterly and some as often as monthly.
- Flexibility — Consider the repayment options offered. Are payments required during repayment? Can the principal be deferred? Are alternative repayment programs (graduate repayment or income sensitive, for example) offered?
How do I choose an alternative loan program?
There are many ways to compare alternative loan programs. And oftentimes, a student's and family's unique circumstances will determine what loan program makes the most sense.
Alternative loan programs differ in who the borrower is (the student, parent or other co-applicant). You should refer to the Alternative Student Loan pages within this site:
What’s the difference between deferment and forbearance?
Deferment should be your first option when trying to pause your monthly payments. To those who qualify, deferment temporarily suspends all monthly payments on your loan. However, interest — aside from subsidized Stafford loans — continues to accrue. Reasons to qualify for deferment include: attending school at least half time, economic hardship, unemployment, or military deployment. To learn more, see our page on deferment.
Forbearance allows you to either temporarily suspend monthly payments or temporarily reduce payments on your loan, but interest still accrues. Forbearance is determined on a case-by-case basis, meaning that you may only be eligible to reduce your $100 monthly loan payments by $20. However, just like deferment, you may also qualify to have all of your student loan payments suspended. Contrary to deferment, interest still accrues on your subsidized Stafford loan in the case of forbearance. Reasons to qualify for forbearance include economic hardship, natural disasters, illness, unemployment, or military deployment. Learn more about forbearance.
Why is the amount of my student disbursement less than I was awarded by the school?
Lenders are allowed to retain a percentage of the amount you borrow in guarantee fees and/or origination fees. Guarantee fees are used by the lender in creating a reserve to protect the loan program in instances when borrowers default on their loans. Origination fees are a processing fee retained by lenders.
The Department of Education determines the maximum percentage for guarantee and origination fees for Federal Stafford, PLUS and Direct loans. The maximum origination fee in these programs is 3% while the maximum guarantee fee is 1%.
For alternative loans programs, there is generally no maximum fee rate. Fees for alternative loans can range from 0% to 10% or more depending on the credit worthiness of the borrower and risk associated with the loan.
How is my EFC calculated?
The federal government proscribes an official federal EFC calculation after you have complete the FAFSA form. This calculation determines family resources available from a family's income (less allowances for taxes and living expenses) and assets (less allowances for retirement). A percentage of these available amounts are earmarked as EFC. Read more about the Cost and your EFC.
Why do some schools use an EFC that differs from what my Federal EFC (on my SAR) says?
Some schools use an Institutional EFC calculation to determine eligibility for non-Federal sources of financial aid. This calculation usually considers additional family resources like home equity, that are not part of the Federal EFC calculation. Learn more about the financial aid award process.
How do I manage the difference between the school's cost and the amount of financial aid I was awarded?
There are three main options available to students and families:
- Contributions from savings — a family might consider using savings or investments to meet educational costs. Families with assets that can be liquidated for educational expenses generally have less reliance on financial aid and pay less in fees and interest expenses
- Contributions from income — some families might be able to meet educational expenses by allocating funds from their current budget. This options requires a family to closely analyze their income and expenses and determine an amount that they can pay on an ongoing basis. Adjustments may have to be made to existing household expenses to afford an amount to allocate from Income.
- Contributions from private student loans — some families must consider alternative loans as a means to meet educational costs. While these options typically require the lowest monthly payments, they require the student and family to pay interest and/or finance charges in addition to the amount borrowed.
For more information, check out our pages on Alternative Loans and Monthly Payment Plans.
What should I do if my family circumstances changed since submitting my financial aid applications?
Financial aid officers have some latitude in determining what data is used to calculate a family's EFC. You should contact your school's financial aid office with any circumstance that will affect your family's income or expenses.
If you are able to document such circumstances (for example the unemployment of a family member or medical expenses that the family has incurred), the financial aid officer might be able to incorporate these circumstances and recalculate your EFC.
How do I choose a college?
While a very broad question, there is some basic information that you can consider and many Internet resources that can help you in the college search. Check out the college search engine at HowToGetIn.com.
You should obviously consider each college's academic offerings. Are the programs broad enough (if you do not have a major in mind) or focused enough (if you have a major in mind)? Is the college accredited? What is the graduation rate for students at the school? Does a particular school offer the program you're interested in studying.
Are you interested in a large or small institution. Large institutions may offer less personal interaction with professors or a higher student to faculty ratio. Smaller schools may offer a more intimate academic setting and more personalized services.
Are you interested in on-campus living or will you commute. This will obviously determine if you look for schools nationally, or close to home.
Is cost and financial aid a factor? If so use the Internet to learn about the college's cost and information about the financial aid process and applications the school requires. Most schools also provide averages and statistics about financial aid awards made to students.
Do you require special services? The links and searches below will help you identify the specific offerings of schools.
You should also consider the student life issues of the schools you research and relate those offerings to your interests. Are you interested in an active, vibrant social life? Or are you interested in a more academically focused environment.
Visit How to Get Into College to find more information about schools. You may also be interested in online degree programs.
Whom do I contact for questions about my Direct Student Loan?
If you have questions about your Direct Student Loans, please contact the Direct Loans Center at 800-848-0979.