<p>We are trying to decide between two different schools. One school we could probably do without debt - or little debt. The other school we would certainly need the $5500 per year from the FAFSA - and who knows if we would need more. Can some one give me a run down on the terms of the FAFSA loan and what we could anticipate the monthly payments to be? (I'm embarrassed to say I don't know.) I want to make sure my daughter understand this before we commit one way or another. Thanks.</p>
<p>Assuming you are talking about student Stafford loans rather than parent PLUS loans.</p>
<ol>
<li><p>You have to file FAFSA to be eligible for Stafford loans but they are awarded to the student by the school.</p></li>
<li><p>The limits for a dependent student are 5500 for freshman year, 6500 for sophomore, 7500 for subsequent years with an aggregate of 31,000.</p></li>
<li><p>The terms depends on the sort of loan you receive. Stafford loans may be subsidized or unsubsidized.
-Subsidized loans for the 2011-2012 year have an interest rate of 3.4% but the govt pays the interest until you graduate or drop below half time, plus a 6 month grace period, at which time the loan goes into repayment and you must start paying interest and repaying principal. The interest rate for 2012-2013 is set to jump back up to 6.8%.
-To be awarded a subsidized loan requires that the student has need as determined by COA-EFC-any other aid/scholarships. Up to $3500 of the $5500 freshman loan can be subsidized if there is “need”. (For sophomore up to $4000 can be subsidized, for third year on up to $5000).
-Unsub loans have an interest rate of 6.8%. You are responsible for the interest from day 1. The interest can be deferred until the loan goes into repayment (same six month grace period as above) but will accumulate and be added to the loan balance.
-Stafford loans have an origination fee I think it is 1% (not entirely certain).</p></li>
</ol>
<p>There is also a student loan called the Perkins loan. It has very limited availability. it is subsidized, has a 5% interest rate, no origination fees, repayment starts after you graduate/drop below half time plus a 9 month grace period.</p>
<p>Thanks for explaining…but I see I have a lot to learn. There is a lot more to this than I thought.</p>
<p>Let’s work on the assumption that we might need the $5,500 per year - nice to know that this amount can increase if needed. If we end up at the end of her college with about $22,000 in Stafford loans then she would have 6 months grace period before she has to start paying the loan off. And if I am understanding correctly a portion of the interest would be subsidized and therefore be at a lower rate. </p>
<p>Okay so I am closer to know what the question I should have asked in the first place is. </p>
<p>Is there a calculator that would tell us what her payments would be if we needed Stafford loans for schooling? I really have no idea what to tell her. Are we talking $100 a month, or several hundred $ a month? And for how long? (Assuming she would have about $20-25k in loans.)</p>
<p>So much to consider…</p>
<p>Currently subsidized Stafford loans have a lower rate. The sub rates have been dropping every year for the last few years but are currently scheduled to increase next year. For 2011-2012 the interest rate is 3.4% for sub and 6.8% for unsub. The govt pays the interest until the end of the grace period on the subsidized portion of loans only (if you have any subsidized - the loans can be all unsubsidized).</p>
<p>Normal repayment is over 10 years. For a $25000 total loan balance at 6.8% the repayment would be around $288 a month for 10 years.</p>
<p>finaid.com has a loan calculator here</p>
<p>[FinAid</a> | Calculators | Loan Calculator](<a href=“Your Guide for College Financial Aid - Finaid”>Loan Payment Calculator - Finaid)</p>
<p>Thanks so much. I do understand it better now. Now I understand more what we are up against…but still not sure what we are going to do.</p>