In addition to the federally subsidized Stafford and Perkins loan, which are awarded based on a need assessment, you can also expect to see an unsubsidized Stafford loan and Federal Work-Study. For work-study, expect your child to work 10-15 hours per week, although it will vary depending upon the school. If you accept the work-study award you’ll need to communicate with the school’s financial aid office to secure a position. Be aware, that the money earned by the student will be paid to the student, but will not be deducted from the parent’s bill. Additionally, work-study wages are not counted against family contribution as you apply for financial aid the following year.
Other unsubsidized loans are available, such the Federal PLUS Loan and private student loans. The Federal PLUS Loan is for parents, not students. Loans are made by FFEL (Federal Family Education Loan) lenders and has a fixed interest rate of 8.5%, although is subject to adjustment twice a year. Parents are allowed to borrow up to the cost of the education, less other financial aid. There’s usually a 3% origination fee and repayment begins 60 days after the loan has been disbursed.
Private student loans are also available through such accredited banking and credit institutions such as Chase, Citibank, Discover, Wells Fargo and others such as Sallie Mae. Obtaining a private student loan is more challenging than it has been in the past given the current state of the economy. Additionally, most lenders limit the loan amount to the cost of education, less other financial aid, similar to the PLUS loan. The student will want to consider how much debt they’re willing to take on and COA should play a role in the decision making process when they choose their school.