Financial Aid: STUDENT LOANS: ANOTHER FORM OF SELF-HELP ASSISTANCE


NOTE: This document was generated from the 1995-1997 UIUC Programs of Study. Every effort has been made to ensure accuracy, but be advised that requirements may have changed since this book was published. Errors may have also been introduced in the conversion to a WWW document. Thus for items of importance, it might be wise to seek confirmation from either the paper version or a live human being.


Low-Interest Loans Awarded by the University

The Office of Student Financial Aid offers loans to students who demonstrate financial need. All on-time applicants for University aid are considered for low-interest loans from the University. The Office of Student Financial Aid, acting for the University of Illinois as lender, determines who is eligible for, and the amount of, a University long-term loan.

These loans normally carry an interest rate of 5 percent, and repayment is deferred until six months after the borrower ceases to be at least a half-time student.

The University of Illinois also awards the Federal Perkins Loan to students. These loans carry a 5 percent interest rate, and repayment is deferred until either six or nine months after the borrower ceases to be a full-time student. Federal Health Professions Student Loans, available to veterinary medicine students, carry a 5 percent interest rate with repayment beginning twelve months after the borrower leaves school.

New Federal Direct Loan Programs

For those who attend college at least half time, the federal government has supported guaranteed long-term loan programs which offer several borrowing advantages to students and their families. Loans are available to all students, although programs differ slightly for those who demonstrate financial need, and available amounts are determined by whether a student is dependent or independent.

Beginning with academic year 1994-95, the University of Illinois has participated in the William D. Ford Federal Direct Loan program. (Previous guaranteed loans were titled Stafford Loans under the Federal Family Education Loan [FFEL] program.) Under the Direct Loan program, schools disburse amounts directly to students through funds received from the federal government. Previously, students borrowed funds from commercial lenders.

Subsidized Direct Loans are available to students demonstrating financial need. The interest subsidy is paid by the federal government while the student borrower is in school, and payments are deferred until six months after the borrower ceases to be enrolled at least half time. At the freshman level, a student may borrow up to $2,625; at the sophomore level, $3,500; at the junior and senior levels, $5,500. The aggregate maximum that can be borrowed for undergraduate study is $23,000. The interest rate varies, but the maximum is 8.25 percent.

Parents of dependent students can borrow through the Federal Direct PLUS Loan program. For each dependent student, each year parents may borrow up to educational costs, minus the amount of other aid the student receives. Payments begin while the student is still in school. The interest rate varies, but the maximum is 9 percent.

The Federal Direct Unsubsidized Loan program is available to independent undergraduate and graduate students. While payments are deferred until a student borrower leaves school permanently and a relatively attractive interest rate (maximum 8.25 percent) is charged, interest accrues while the borrower is in school. Independent undergraduates may borrow up to the following annual amounts according to class level: freshman, $6,625; sophomore, $7,500; junior and senior, $10,500 each acdemic year. Dependent students whose need is not met by other resources may borrow up to the same maximum amounts (including subsidized loans) available to independent students.

Another advantage of the Direct Loan program is that it provides the student borrower with several repayment options including income-contingent plans and graduated repayments. For further information concerning Federal Direct Student Loans, contact the University of Illinois Office of Student Financial Aid.

NOTE: As this publication was being produced, Congress was considering proposals which would revise the Direct Loan program. One or more provisions of federal loan programs may have been changed.


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