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If you apply for financial aid to attend the University of Central Oklahoma, your award may include student loans, along with grants, scholarships and work-study. Yet, not all types of loans are the same, with limits, interest accrual and repayment being differentiating factors. In turn, you’re recommended to learn more about each type of student loan and how it may affect your future financial situation before you approve your award.
What are Student Loans?
Student loans are a type of financial aid award you borrow and pay back with interest. On a general level, these are divided between federal student loans and private and alternative options available through banks or other organizations. Approximately 70% of all college students take out student loans in some form to fund their educational endeavors, including for tuition and related expenses.
Student loans also are not an all-encompassing financing solution for your education, and limits are in place. Read more about limits for federal student loans to better understand your award.
Along with these general points, keep in mind the following:
- Student loans are borrowed money that must be repaid;
- Students must be enrolled at least part time (six hours for undergraduate or five hours for graduate students) each semester to receive loan funds;
- First-time borrowers must complete Entrance Loan Counseling and electronically sign a Master Promissory Note (MPN) before a loan can be processed;
- Loan funds are disbursed in two installments: the first during the fall semester, and the second during the spring semester. Loans for one term only have a single disbursement;
- Students who withdraw or drop to less than half time during the fall semester will have the spring disbursement of their loans canceled. A loan reinstatement form must be completed to request reinstatement of spring loan funds, should the student enroll for the spring semester; and,
- Student loan funds must first be used to pay tuition, fees, room and board. Remaining loan funds will be refunded to the student.
As part of the William D. Ford Federal Direct Loan Program, the U.S. Department of Education originates all federal direct loans, also known as federal Stafford loans.
In general, federal student loans have the edge over their private counterparts. Interest rates are fixed and usually lower, and a cosigner typically isn’t required. Following graduation, federal student loans allow for flexible repayment, including income-based and extended plans, in the event you experience difficulties fulfilling your monthly obligation.
As well, student loan forgiveness is a possibility for certain career paths if you meet specific conditions.
In examining your award, federal student loans include the following types.
Direct Subsidized Loans
Direct subsidized loans help undergraduate students who demonstrate financial need cover costs directly related to higher education, such as tuition.
You’re not expected to pay off the loan while you attend classes. Instead, the U.S. Department of Education pays the interest while you are enrolled in school at least half time, for the first six months after a student leaves school (grace period) or during a period of deferment.
Direct Unsubsidized Loans
Direct unsubsidized loans aren’t based on financial need and offer assistance to undergraduate, graduate and professional students for education-related expenses.
- While students are not required to demonstrate financial need, the loan’s amount cannot exceed the cost of attendance.
- The student is responsible for paying interest that accrues from the time the loan is disbursed until the loan is paid in full.
- The student may pay the interest while in school or during a period of deferment or forbearance.
- The student may allow the interest to accrue and have it added to the principal amount of the loan. If a student chooses not to pay the interest as it accrues and allows it to be capitalized, this will increase the total amount that must be repaid. Interest will be charged on a higher principal amount.
- The student may receive both subsidized and unsubsidized loans for the same enrollment period, depending on financial need. The total amount of loans may not exceed the annual loan limit.
Direct PLUS Loans
Direct PLUS loans are an option for graduate and professional students and parents of dependent undergraduate students to assist with paying for educational expenses not covered by the financial aid package—for instance, books and other supplies.
- PLUS loans are available to parents to help pay for the education of a dependent student who is enrolled at least half time and making satisfactory academic progress.
- A completed FAFSA must be on file before the PLUS loan can be processed.
- The interest rate is variable but not to exceed 9%.
- Parents, graduate and professional students may borrow up to the total cost of attendance-less aid awarded and other educational resources.
- Parents and graduate or professional students are required to pass a credit check or demonstrate extenuating circumstances. If a PLUS loan is denied due to adverse credit, the student may contact the Financial Aid Office to see if additional funding is available.
- Loan repayment and interest accrual begin 60 days after the loan is fully disbursed.
- Apply for a PLUS loan through the Direct Loan Program.
How to Apply for Federal Student Loans
- Complete the FAFSA and submit additional documents as requested.
- Accept the award offer on UCONNECT.
- Complete Entrance Loan Counseling via the student aid website.
After you have accepted your award, the lender sends loan funds to UCO to be disbursed to your Bursar account balance. Any remaining funds are issued to you.
Lenders or originators for private student loans include banks, credit unions, state loan agencies and other financial institutions and organizations. Private student loans may have a fixed or variable interest rate and frequently require a cosigner. As well, realize that as soon as you borrow or the loan is disbursed, interest immediately starts to accrue, and you’ll be expected to make payments.
Due to these factors, private student loans are only recommended after you’ve exhausted federal loans and other forms of financial aid. Consider the following points:
- Private (or "alternative") student loans may be an important funding source for students who are ineligible for federal student loans or who need more funds than the federal programs can supply;
- The University of Central Oklahoma requires all students applying for private or alternative loans to complete a FAFSA and be considered for federal funding first;
- To apply for a private loan, view the borrower benefits and apply electronically; and,
- Students should allow a minimum of three weeks from the time they request the loan on the lender's website until UCO receives the loan proceeds.
- If you choose to receive an Alternative Loan and are not completing the FAFSA, please complete the FAFSA Nonparticipation Form. A completed FAFSA is required if you plan to receive any Federal Financial Aid in addition to an Alternative Loan.
How to Evaluate Student Loan Options
You’ve received your financial aid package. At this point, we encourage you to evaluate your awards before approving them, taking into account the following factors.
- Understand how much you’re borrowing: The numbers on the page tell just one part of the story. Calculate how much interest you’ll be expected to pay over the loan’s term and factor in any origination fees. Further research entry-level salaries for your chosen field and compare this amount to your monthly loan payment. With these aspects in mind, only take out what you’ll be able to repay.
- Keep records: Don’t find yourself surprised when you finish your degree or if you have to take time off before then. Understand all terms for repayment and interest and be prepared to work with the lender or loan servicer following graduation.
- Understand the terms of repayment: No matter the loan type taken out; you’ll be expected to provide a full minimum payment each month. Understand what happens when you don’t repay the loan and what you can do if you’re struggling to make minimum monthly payments.
Get Your Questions About Student Loans Answered
Do you have any questions about completing the FAFSA or the student loans in your financial aid package? Direct your inquiries to Student Financial Services by email at email@example.com or by phone at 405-974-2727.