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COMPARE AND CHOOSE: IT PAYS TO UNDERSTAND COLLEGE FINANCING OPTIONS

Education is an important investment for students, and we encourage individuals to carefully consider all financing options when choosing a student loan. Parents should often be included in financing discussions because some loans require credit checks or cosigners.  Among the factors to evaluate are:

  •  Total cost of repayment.
  •  Whether the lender offers life of loan servicing.
  •  How their student loan fits into their overall financial picture.;

What is the right option? When comparing the cost of student loans, families should ask:

  • What is the interest rate?
  • Are there any loan fees?
  • Are there any loan discounts?
  • What will the monthly payment be upon graduation?
  • What is the repayment term?

What about repayment? When considering repayment, families should ask:

  • Is there a grace period after graduation?
  • How long is the repayment term?
  • Who will service the loans?
  • Are there deferment or forbearance options?
  • Is there loan forgiveness?

Students and their families have choices when it comes to college financing.  Every family is unique and no one solution is right for everyone.  The chart below outlines the available loan programs to help compare and decide which financing option is best.

Note: Other types of loans may be available, but the chart below represents the most common programs.

Loan Comparison Chart

Interest Rate
3.86-5.41%
5.0%
5.0%
6.41%
6.41%

2.25-13.99%

Check with your lender.

Interest Rate
Type
Fixed
Fixed
Variable or fixed - Check with your lender.
Fees
1.072% of the accepted amount
None
None
4.288% of the accepted amount
4.288% of the accepted amount

0-5% of the accepted amount

Check with your lender.

Minimum enrollment
Undergrad: 6 cr, Grad: 4  cr
Undergrad: 6 cr, Grad: 4 cr 
12 cr. hours
6 cr hours
4 cr hours
Less than half-time for some - Check with your lender.
FAFSA
required
YES
YES
YES
YES
YES
NO
SAP required
YES
YES
YES
YES
YES
Check with your lender.
Standard repayment term
10 Years
10 Years
10 Years
10 - 25 Years
10 Years

Typically 5-15 years

Check with your lender.

When payment starts
6 months after graduation or falling below half-time enrollment
Perkins: 9 months (Purdue Loan: 6 months) after graduation or falling below half-time enrollment
12 months after graduation or falling below 12 cr. hours
Optional-based upon application
Immediately after falling below half-time enrollment
Check with your lender.
Who can apply
Student
Student
Student
Parent
or Step Parent
Student
Student
Responsible for repayment
Student
Student
Student
Parent
Student
Student
Student
Credit Check Required
NO
NO
NO
YES
YES
YES
Loan Limits
Based upon grade level and dependency status
$2,000
$2,000
Up to 100% of the cost of attendance, minus other financial aid received
Up to 100% of the cost of attendance, minus other financial aid received

Generally, up to 100% of the cost of attendance, minus other financial aid received.

Check with your lender.

Minimum required payment during student's enrollment
None; interest may accrue.
None
None
Payments can be deferred while the student is in school; interest continues to accrue and is added to the loan's principal after graduation.
None; interest may accrue.
Many private lenders allow payments to be deferred while the student is in school; interest accrues during this time. Many lenders offer options to make interest payments while the student is in school.
Repayment Plans
Graduated, extended, or income-based plans may be available to qualified borrowers.
None
None
Graduated and extended repayment options
Graduated, extended, or income-based plans may be available to qualified borrowers.
Discretionary programs available for troubled borrowers but are not part of the loan agreement.

Cosigner /
endorser option

N/A
N/A
N/A
YES
YES
Most private lenders require a cosigner for freshmen. A cosigner may result in a better interest rate. Check with your lender.
Cosigner /
endorser release
N/A
N/A
N/A
NO
NO
Some after 1 year - Check with your lender.
Tax deductible interest
YES
YES (subject to IRS guidelines)
YES (subject to IRS guidelines)
YES - parent can take tax deduction (subject to IRS guidelines)
YES
Generally, YES - the student can take the tax deduction (subject to IRS guidelines). Restrictions apply to loans for less than half-time enrollment.
Ability to consolidate
YES - Up to 25 years

Perkins: YES (but borrower must include at least one Direct Loan or Federal Family Education Loan (FFEL) Program loan in the Direct Consolidation Loan; note that benefits specific to Perkins Loans will be lost, though.)

Purdue Loan: NO

YES (but borrower must include at least one Direct Loan or Federal Family Education Loan (FFEL) Program loan in the Direct Consolidation Loan)
YES - Up to 25 years
YES - Up to 25 years
Check with your lender.
How to apply
Accept on myPurdue
Accept on myPurdue
Accept on myPurdue

Accept on myPurdue and www.student
loans.gov

Lender website