![]() If you don’t have a strong enough credit score to qualify, you might not be able to get PLUS loans for your child. This is also important for parents who are taking out PLUS loans on behalf of their dependent child attending college. If you have marks against your credit-like loans in default, repossession or bankruptcy-you might not get approved for a PLUS loan. However, if you need a PLUS loan, you’ll be subject to a credit check. If you’re applying for subsidized and unsubsidized loans, your interest rate doesn’t take your credit score into account. They are always fixed-not variable-and won’t change over the life of the loan unless you consolidate through a direct consolidation loan or your loans become private through refinancing. Federal Student LoansĪt the federal level, student loan interest rates are set by Congress. How Student Loan Interest Rates Are Setįederal student loans and private student loans set their interest rates differently. Often, interest capitalizes when your loan first enters repayment and after periods of deferment or forbearance. Capitalized interest only occurs at certain times, and exactly when this will happen varies based on your loan. Essentially, you will begin accruing interest on your interest. If you qualify for this type of loan, the government will pay your interest when your loan isn’t in active repayment.Īlso keep in mind that the interest on your loans will capitalize, meaning that the accrued interest will be added to your loan balance. The exception to this rule is federal subsidized loans. If you don’t make any payments while you’re a student, your loan balance will grow during your time in school. Student loan interest usually begins accruing as soon as the loan is distributed to you or your school. Plus, most private student loans don’t offer the same flexible repayment plans available from federal lenders, like income-driven repayment plans. They tend to have higher interest rates compared to federal student loans. These types of loans come from banks, credit unions or online lenders. ![]() If you don’t complete the FAFSA or your expected family contribution is more than you can afford, you may need to apply for private student loans. ![]() When you complete the FAFSA, you’re approved for federal scholarships, grants, work-study opportunities and student loans. Private student loans are a good option if you’ve exhausted all your federal funding through the Free Application for Federal Student Aid, or FAFSA. While most student loans are granted at the federal level, some students need to borrow more or use other resources. Federal direct subsidized and unsubsidized (undergraduate)įederal unsubsidized (graduate or professional)įederal direct PLUS (parent, graduate or professional)
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