Understanding Student Loans

Every eligible student who files the Free Application for Federal Student Aid (FAFSA) will have access to Federal Direct Stafford Loans. This is a loan program offered through the Department of Education. Students can take out this loan in their own name, without having a parent co-signer. There is a maximum amount that students can borrow in Direct Stafford Loans that varies depending on the student’s year in school. First-year students can borrow up to $5,500, sophomores up to $6,500, and juniors and seniors up to $7,500. These are ten-year loans that the student would start making payments on six months after they graduate or stop taking classes at least half time.

There are two types of Direct Stafford Loans: subsidized and unsubsidized. For a subsidized Direct Stafford Loan, the government pays the interest while the student is in school. For the unsubsidized Direct Stafford Loan, the student would be responsible for paying that interest during their time as a student. Not every student will qualify for a subsidized loan — this all depends on the results of the FAFSA form. In order to continue using these loan options for sophomore through senior year, families will need to fill out the FAFSA form every year.

If students need to borrow more than is offered in Direct Stafford Loans, there are two additional loan options: Parent PLUS Loans and private loans. Parent PLUS is a loan option offered through the federal government that parents can take out in their own names to pay for their students’ education. Private loans would be loan options for either the parent or the student through a private bank or other private lender. For more information about Parent PLUS or private loans, reach out to our Office of Student Financial Aid at 319-335-1450 to speak to a financial aid counselor.

When it comes to student loans, be sure that you are borrowing responsibly! A good rule of thumb is to not borrow more than what your starting salary will be when you graduate. That helps keep your loan payments within a range that is realistic for you to pay back. We encourage students to only borrow the amount that they need to cover their direct costs. Student employment on campus can be a great way to cover your personal expenses.

During your time as a student here, be sure to use the Office of Student Financial Aid’s financial literacy resources to learn how to budget effectively and manage your loans. These resources can give you the skills that you need to understand your credit and manage your funds successfully.

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