- [Interviewer] We're here
today with Sean Logan,
director of college counseling
at Phillips Academy.
Sean, one of the big
decisions that students face
is that of student
loans when they're going
through the college admissions process.
Can you kind of explain to me where are
the different places I can get loans
and then how that impacts
what those options are?
- [Sean] Sure, so the government is
probably the best source
of loans right now.
And, you know, there's
also smaller state loan
programs that are out there,
and that varies by states.
- [Interviewer] So that's sort
of the federal government,
then there's the state government.
- [Sean] Yep.
- [Interviewer] Okay.
- [Sean] There are colleges that will
do their own institutional loans
and then there are private
institutions that will do loans.
- [Interviewer] Okay, and of all these
different options, where should I begin?
- [Sean] So, with your
financial aid package,
colleges will help you
sort of understand this,
but in general, colleges
are gonna use a lot
of federal money at
first and try to package
you that way, and again,
it's generally the best
type of loan you can get.
There are need-based
loans that are out there
so you have to have certain
levels of income to qualify.
The first being that
the Federal Perkins loan
generally for more lower income students.
That has a lot of really
positive perks to it.
They include things like a fixed rate.
It has no origination fee.
You have the flexibility
with the government
paying all of the
interest until six months
after you graduate, so that's
a great factor for that.
- [Interviewer] Okay, so you're not gonna
pay any interest while you're in school.
- [Sean] While you're in school,
and you do have, again,
some flexibile terms
with deferring that if
you go to graduate school.
And again, you can take out in your
first year up to 5,500 dollars, uh,
you can take out up to 5,500
dollars as an undergraduate
for the Federal Perkins loans.
- [Interviewer] Okay,
and that's up to 5,500?
And is that per year or overall?
- [Sean] Uh, a year.
- [Interviewer] Okay, got it.
Are there any other
kind of need-based loans
that are available from
the federal government?
- [Sean] There are, so there's
also subsidized Stafford loans.
They're not quite as good terms
as the Perkins loans, but
again, still very good.
Probably the next best
loan you'll find out there.
There is an origination fee to that.
Right now, the interest rate is actually
a little bit lower than the Perkins loan,
but that will go up
depending on the markets.
Again, it has the same maximum
of 5,500 dollars per, for this
year, for your first year.
- [Interviewer] And is that
5,500, does it stay 5,500
every year or does that change?
- [Sean] So that can go
up as you're a sophomore,
junior, or senior, that amount can go up.
So you have a little bit
more flexibility with that.
And the subsidized Stafford, also,
their interest rate is also paid for
by the government until six
months after you graduate.
- [Interviewer] I see, so that's also
no interest paid while in school.
- [Sean] Correct.
- [Interviewer] Are there any loans that
the federal government offers
that aren't need-based?
- [Sean] There are.
Now, one thing to remember is you still,
you need to fill out a
FAFSA form to qualify
for any federal loans,
so even if you, go ahead.
- [Interviewer] Just so I understand,
so it's even if I don't
have financial need,
my family makes a lot of money,
I still fill out the FAFSA just
to get access to federal loans.
- [Sean] Correct, and that's an important
fact that people don't realize.
So there is an unsubsidized Stafford loan
and again, it's not quite as good of terms
as the other two we've talked about,
but it's still a very good
option for many families.
- [Interviewer] Okay,
so I know that the rates
for the Stafford subsidized
and unsubsidized are the same
so what are the actual
differences between the two loans?
- [Sean] So the biggest
difference is is that
the federal government
will not pay the interest
while you're in school.
- [Interviewer] Okay, so
they're not gonna cover you.
- [Sean] Right.
- [Interviewer] Okay, and then,
are there any other kinds,
you mentioned there was one other kind
of federal loan that's not need-based.
- [Sean] There also is something
called a direct plus loans
which a parent can take
out instead of the student.
It's in the federal program, so it still
has some of the benefits of that program
but it's a higher rate, but again,
it still has a lot of the other benefits
of the federal program and it's
backed by the federal government.
- [Interviewer] Great,
okay, great, so that makes,
those are for the
federal government loans.
What about sort of state
or college sources.
What are those loans all about?
- [Sean] So again, that
really is gonna depend
on the state and it's really
gonna depend on the college.
So, those could be very good options.
Personally, when I was in college I had
some of my loans were college loans
and those loans were actually,
had no interest rate at all.
So I was basically allowed to borrow,
again, in that example we used before,
I borrowed 5,000 dollars but
there was no interest at all.
All I paid back over the life of the loan
was the 5,000 dollars, so college loans
can be a really good opportunity,
but again, not all colleges offer them
and some of them don't
have as good of terms
as say the federal government does.
- [Interviewer] Okay,
so that's really sort of
state by state, college by college.
There's not sort of a
general rule of thumb,
it's just worth looking into.
- [Sean] But it's worth looking into.
The colleges will, if
you qualify for them,
they'll give you those options.
At the state level, it's
also worth looking into.
The colleges will
generally be able to sort
of let you know if you
qualify for these loans
and you can decide how good they are for
your family and your situation.
- [Interviewer] Great,
and then you mentioned
federal, state, college, and
you also mentioned private loans.
Where do those kind of
fall into this equation?
- [Sean] So, I think in
terms of the best terms,
the most flexibility,
they're probably at the,
you know, they would be my last option.
Now, they could be very
good options for a family
that still need money, but I would say
if you've exhausted those other options,
this is, that's probably
the next place to go.
You know, they aren't subsidized.
They are not need-based.
And they definitely require,
most of them will require
a parent to commit to repay
the loan if the student fails to.
The interest rates will vary
by the different institutions.
So, banks, other financial institutions
typically have the highest interest rates
and the least flexible payment options.
- [Interviewer] So then,
why wouldn't, as a student,
why wouldn't I just
take all Stafford loans
or Stafford subsidized, or you know,
if I didn't qualify,
Stafford unsubsidized.
Why would I even bother looking
at something like a private loan.
- [Sean] Well, unfortunately,
with a Stafford loan,
right now, in the first
year the most you can
take out is 5,500 dollars and you may need
a little bit more than that for loans.
So, you may need to look at other options
and so that's why you would move down.
With a Perkins loan, you may not qualify
because you don't meet
the income standards
and for the subsidized Stafford loan,
you may not qualify for that.
So, again, you may, you would definitely
qualify for the unsubsidized loan,
but then if you need a bit more
you may have to go to
these other alternatives.
- [Interviewer] I see,
so if you kind of pass
that yearly maximum on the Stafford loans,
you don't qualify income-wise for Perkins,
then it'll be down to either a plus loan,
which has a fairly high interest rate,
state or college loan,
which kind of varies,
or the private loans, and
those can have variable
interest rates and maybe
not as good repayment terms.
- [Sean] Right.
- [Interviewer] But it sounds
like first and foremost,
if you can get access
to Stafford or Perkins,
that's the place to start?
- [Sean] Yes, absolutely.
- [Interviewer] Great, thank you so much.