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Final Student Loan Decisions

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Final Student Loan DecisionsBy May, most high school seniors have settled on which college to attend in the fall. At this point, final decisions about the financial aid package must be made, as most colleges will soon require some type of payment to be made to secure your place in their upcoming freshman class.

You may have been offered federal student loans as part of your school’s financial aid package. A loan is money you borrow and must pay back with interest, so it is a very serious decision to undertake. There may be some confusion surrounding student loans now, as payments have been deferred during COVID for those who already graduated from college. You may also have heard a great deal of talk about forgiving student loans, but be aware that no decisions have been made at this point. Any student loans you take out now should be with the understanding that they will have to be repaid.

Another big factor to watch is that interest rates are currently increasing. Although interest rates have been set for federal student loans disbursed before July 1, 2022, it is highly likely that they will increase for any loans taken out after that point. It will probably be more advantageous to commit to any students loans for the upcoming year before July 1.

If you decide to take out a loan, make sure you completely understand who is making the loan and the terms and conditions of the loan. Student loans can come from the federal government, from private sources such as a bank or financial institution, or from other organizations. Loans made by the federal government, called federal student loans, usually have more benefits than loans from banks or other private sources. Current federal student loan options include:

A. Direct Subsidized Loans:

          • Made to eligible undergraduate students who demonstrate financial need.
          • You’re not usually charged interest on the loan during certain periods.
          • Receive up to $5,500, depending on grade level and dependency status.
          • The interest rate is 3.73% for loans first disbursed on or after July 1, 2021 and before July 1, 2022.


B. Direct Unsubsidized Loans:

          • Made to eligible undergraduate, graduate, and professional students.
          • Eligibility is not based on financial need.
          • You’re responsible for paying the interest during all periods, but it may be deferred until after graduation.
          • Receive up to $20,500 (less any subsidized amounts) depending on grade level and dependency status.
          • The interest rate is 3.73% for loans made to undergraduate students and 5.28% for loans made to graduate and professional degree students for loans first disbursed on or after July 1, 2021, and before July 1, 2022


C. Direct PLUS 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.
          • Eligibility is not based on financial need, but a credit check is required.
          • Maximum amount is the cost of attendance (determined by the school) minus any other financial aid the student receives.
          • The interest rate is 6.28% for loans first disbursed on or after July 1, 2021, and before July 1, 2022.


I advise families to think carefully about their ability to repay these loans in the future. You do not have to borrow the full amount offered, but it is important that you make a decision as soon as possible. Your college will usually require a promissory note, and you may need to participate in student loan entrance counseling. If you have already made your college choice and loans are part of that picture, CFAA offers loan appointments in May to help in the final decision-making process.

Remember that CFAA helps with every step of the financial aid process, from completing the FAFSA and completing the CSS Profile to comparing financial aid offers and understanding student loan options. Juniors can set a CFAA new client free strategy session or a 15 Minute Power Chat to learn more about finding ways to pay for college. To get the latest financial aid information and college application to-do lists, look for my weekly JustAskJodi emails and check out my monthly CFAA e-newsletter.

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