28 College Loans There’s a great deal of talk these days about the amount of debt college students are incurring. Smart students understand how difficult it can be to repay a large stu- dent loan, and they do whatever they can to minimize the amount they need to borrow. Considering that over half the financial aid that’s awarded is in the form of loans, it is important that students be well informed about their loan options—and their repayment obligations. Direct Loans Students with financial need are usually offered a Direct Subsidized Loan as part of their financial aid package. Students without financial need can get a Direct Unsubsidized Loan. A Direct Subsidized Loan is preferable— the interest rate is lower and the government pays the interest on the loan while the student is in college. Repayment on a Direct Loan doesn’t begin until six months after the stu- dent has left college. First year students can borrow up to $5,500 a year. Second year students can borrow up to $6,500 a year. Federal Perkins Loan An undergraduate student with exceptional need may be awarded a Federal Perkins Loan. Repayment begins nine months after the student is out of college. Students apply by completing a FAFSA. PLUS Loan (Parent Loan for Undergraduate Students) PLUS Loans are available to parents with good credit. Parents can apply for a PLUS Loan for the total cost of attendance, minus any financial aid the student has received. The college’s Financial Aid Office can provide information on applying for a PLUS Loan. Private Loans Many banks and lending institutions offer supplemental educational loans to credit-worthy families. Because these loans are privately funded, the fees and interest rates are likely to be much higher. Many of these loans promise low introductory rates, but the rates may change. Federal loan programs have a variety of options to help students pay off their loans—private loans do not. Families should exhaust their federal loan options before ever considering a private loan.