STEP 2: Learn All About Student Loans
Borrowing a federal student loan is a big responsibility. It is a loan, which means you are required to pay it back to the federal government after you either graduate, leave school or drop below six credits. Student Financial Services suggests that students apply for loans only after all other types of aid have been determined. You, the student, certainly do not want to have unnecessary debt after college.
Remember, loans are to be used for educational purposes only.
Read the following FAQ (Frequently Asked Questions) regarding the loan process before continuing.
What is a student loan?
A loan is borrowed money you must repay with interest. Student loans must be repaid (principal and interest) over an extended period of time. The federal student loan program is called the Federal Family Education Loan (FFELP), which is also called the Stafford Loan.
The Federal Family Education Loan program consists of the following:
- Stafford (subsidized and unsubsidized)
- Parent Loan for Undergraduate Student (PLUS)
Is a credit check made?
There is no credit check made for Federal Student Loans. However, there is a credit check for a parent PLUS loan.
How and when do I start repaying my student loan?
You must start repaying your loan six months after you graduate, leave school, or drop below half time (that is, attending less than six credits). This is called the grace period. Your lender, and not the school, will send you information about your repayment terms.
What is the interest rate?
Currently, the interest rate is 6.0 to 6.8%, depending on the type of federal loan.
What is the difference between a subsidized and unsubsidized loan?
There are two basic types of Stafford loans: subsidized and unsubsidized.
Subsidized Stafford Loan - The federal government pays the interest on your loan while you are in school (attending at least six credits) and during the six month grace period. You must have demonstrated financial need in order to qualify for a subsidized loan.
Unsubsidized Stafford Loan - You, the student, are responsible to pay the interest on the loan while in school (attending at least six credits) and during the six month grace period. You can pay the interest as you go along on a monthly basis or you can allow it to accumulate and be added to the principal amount of your loan. The choice is yours.
How much can I borrow?
The maximum loan amount depends on the number of credits you have earned at North Shore Community College (this includes transfer credits that have been accepted from another school). If you are a returning student and want to know how many credits you have earned, log-in to Campus Pipeline and under the School Services tab, select:
Student Services, Registration & Financial Aid > Student Records > Academic Transcript (look for "earned hours")
| If your earned hours equal... | The MAXIMUM loan amount for the full academic year |
| 0-23 credits | $3500.00 [or $1750.00 per semester] |
| 24 or more credits | $4500.00 [or $2250.00 per semester] |
NOTE: You may qualify for additional loan funding:
- If you filed the FAFSA as an independent student, you may be eligible for an additional $6,000 unsubsidized federal loan (or $3,000 per semester).
- If you filed the FAFSA as a dependent student, you may be eligible for an additional $2,000 unsubsidized (or up to $6,000 if your parent(s) are not eligible for a PLUS (parent) loan).
Are there any fees?
Yes, lenders charge fees in order to process federal student loans. These fees are deducted from your loan amount before disbursement. Fees can range from 1 to 2% of the loan amount, depending on the lender.
Example: A student borrows $3500 of a Federal Stafford loan for the academic year. This is the amount to be paid back after the student graduates, leaves school or drops below six credits. However, the student selects a lender who charges a 2% fee. So, the actual amount of loan that the school receives to apply towards the student's charges is: $3430.00 (or $1715 per semester).
When and how do I receive my loan?
Loans are disbursed (that is, paid to your student account) on a weekly basis throughout the semester. Important: the FIRST disbursement occurs approximately 30 days after the start of the semester.
When your loan is disbursed, it is used first to pay any outstanding charges. If any loan money is left over, the school sends you a refund check approximately one to two weeks after disbursement. This check is made out in the name of the student (the borrower). (PLUS or parent loans are made out to the parent borrower.)
Important! Federal student loans are only disbursed when your class attendance is verified, you have a complete financial aid file at the college, and you satisfy all other federal requirements to receive a loan.
What happens if I fail to make loan repayments after I leave school?
If you fail to make loan repayments you go into default. Defaulting on a student loan has very serious consequences. If you default, any one or more of the following may occur:
- Internal Revenue Service (IRS) can withhold your income tax refund, and apply it toward the loan amount you owe.
- The agency holding your loan may ask your employer to deduct payments from your paycheck.
- The national credit bureaus are notified, which affects your credit rating for a long time.
- You will lose your eligibility to receive additional federal or state aid if you decide to return to school.
Taking out a loan means taking on a lot of personal responsibility. Because of this, the financial aid office wants to make sure that you understand the entire loan application and repayment process.
How do I know if I am eligible for a student loan?
To receive a student loan you must meet all eligibility requirements for Federal Student aid as outlined in the Student Financial Aid Handbook. Some of these requirements include:
1. Enrolled in a minimum of six credits in an eligible program of study
2. Successfully complete a loan entrance interview online
3. Not be in default on a prior education loan
4. Not exceeded the maximum total (aggregate) amount of all Stafford Loans borrowed in the past. These maximum amounts are mandated by federal regulations.
