Default HubSpot Blog

Dissecting the Different Types of Federal Student Loans

Posted by Manuel Fabriquer on Tue, Feb 2, 2016 @ 9:59 PM
Student Loans

For most families of college-bound students, higher education presents a significant expense. In this competitive job market however, a college education is a huge, and often necessary asset, and so students and their parents work hard to make it happen. Fortunately, there is an abundance of opportunities when it comes to financing your studies.

Scholarships and grants are the first consideration for up and coming university freshmen. These are monetary gifts from schools, organizations, or the government (as in the case of the Pell Grant) that do not need to be repaid.

Yet after these resources have been exhausted, and your family financial contribution taken into account, you may be found eligible for some federal loans. While these are a useful option for funding your studies, it is important to understand the facts before you borrow. Let’s take a look at the different types of federal loans available.

Loan Basics

There are many benefits to taking out federal loans as opposed to loans from private lenders. Some of the advantages include:

  •  Flexible repayment options including income based or graduated repayment

  • Lower interest rates than private loans

  • In most cases, no cosigner or credit check required

  • Loan repayment does not begin until you’ve graduated or stopped attending at least half-time

You can borrow between $5500 and $12500 each undergraduate year with Direct Subsidized and Unsubsidized loans. How much you can borrow is dependent on specific circumstances such as your year of study. Additionally, you may be eligible for as much as $5500 per year in Perkins Loans.

After completing your FAFSA and submitting a financial aid application to your school, you’ll receive an award letter. This will let you know the total cost of attendance, what you’ve received in the form of gift aid, and what you are eligible to borrow. It’s good to remember that you only should borrow as much as you need. This is often less than the amount your school offers you.

Dissecting the Loans

Stafford Loans are the most well known type of federal student loan. These are split into two types: subsidized and unsubsidized. Subsidized loans depend on your family’s financial situation and are based on need. While you are enrolled in school at least part-time, interest does not build on subsidized loans. Unsubsidized loans come with a higher interest rate, and they start accruing interest from disbursement. Students do not need to demonstrate financial need to receive Unsubsidized loans.

Direct PLUS Loans are a third loan option. These fixed interest rate loans can be taken on by parents of dependent undergraduate students or graduate/professional students. If parents take out the PLUS loan, they will be responsible for its repayment. However, they do not need to make payments until you are finished with school.

Perkins Loans are a fourth type of loan, based on need, and include a 5% interest rate. Perkins Loans may be eligible for loan forgiveness following your graduation from college. Certain public service jobs can help you qualify as well as Peace Corps service and other opportunities. The criteria are fairly specific for loan forgiveness programs, but are worth looking into.


More questions about financing college? Get in touch with us now! 

Tags: strategies for college, college planning abc, college planning, college applications, cost of attending college, money for college, Manuel Fabriquer, College Admissions, attending college, cost of college

Understanding Loans Before You Borrow

Posted by Manuel Fabriquer on Fri, Apr 17, 2015 @ 3:39 PM

Loan Photo WEB

While a college education can be expensive, it is an invaluable resource, helping you excel in your chosen career field and contributing to your all-around personal development. Fortunately, students these days have options for financing their higher education plans. Alongside scholarships, grants, and family contributions, students can choose to take out federal and private loans to help pay for their educational costs. Taking out a loan is a serious consideration, and it is important that you fully understand the facts and obligations associated with loans before borrowing.

Borrowing from the Government

If you plan to take out loans for your college education, federal loans are the way to go. Your university will determine your possible loans in line with information gathered from your FAFSA. With a fixed interest rate on federal loans, you’ll better know how much interest you’ll be paying over the life of the loan. Conversely, private loans have variable interest rates, which can present a financial challenge should the rates rise. As well, federal loans offer repayment options and programs for those who are experiencing financial hardship.

The most common type of federal loan is the Stafford Loan. These loans have yearly and overall borrowing limits, which differ based on what year you are in college, and whether or not you are financially dependent on your parents. Stafford Loans are divided into two types: subsidized and unsubsidized. Subsidized loans, contingent on financial need, do not accrue interest while you are still enrolled in school part-time or greater. Unsubsidized loans do accumulate interest, beginning when the loan is distributed. Unsubsidized loans also have a higher interest rate.

Other federal loans include Perkins Loans and PLUS Loans. Perkins Loans, with an interest rate of 5%, can assist students with up to $5,500 each year. If you’re a dependent student, your parents may qualify to take out a PLUS Loan. This loan is repaid by your parents and also has a fixed interest rate, making it a better alternative to a private loan. While you are enrolled in school, your parents do not need to make payments. A PLUS loan amount cannot exceed the total cost of educational expenses minus a student’s existing financial aid.

Things to Know

While private loans are an option, their variable interest rates and lack of structured repayment should make them your last resort. No matter the loan, it’s important to know that loans taken out in a student’s name are the responsibility of the student. Once you’ve graduated, you will be responsible for repaying your accumulated educational debt.

Fortunately, most federal loans have a grace period. Immediately following graduation, this grace period typically lasts 6 months. During this time, you won’t need to begin making repayments, but on unsubsidized Stafford loans, interest will still accrue. Many students take advantage of this grace period to commit to the job search in earnest. If you don’t find suitable employment or are experiencing financial hardship, there are options for repayment that can take into account your current income. This can temporarily lower your payments so that you can still continue to make them on time. In some circumstances, there are also options for forbearance and deferment, subject to the discretion of your loan servicer. Depending on your career interests, it may be worth investigating loan forgiveness programs, which can result in some reduction in your overall loan amounts.

 For further information on student loans, check out the following resources:

Tags: strategies for college, college planning abc, college planning, college applications, cost of attending college, money for college, Manuel Fabriquer, attending college, Paying for college, cost of college, student loans

Tables Turn On In-State College Tuition

Posted by Manuel Fabriquer on Wed, Jul 31, 2013 @ 3:01 PM

College Tuition

Many students and their parents have a firm belief that it is less expensive to attend an in-state college or university rather than an out-of-state school. Traditionally, state universities charged out-of-state students a higher tuition amount. However, this is no longer the case and it may in fact be more affordable for your student to attend a college out-of- state than within the local university.

A Changing Trend

The U.S. Department of Education just released a report that shows out-of-state tuitions at public colleges and universities are actually lower than the tuition changed to in-state students. The report showed the average tuition and fees, for full-time undergraduates, for the 2010-2011 and 2012-2013 academic years, was 6.7% higher for in-state students compared to out-of-state ones. On average there was a $9,878 difference. 

Why the Difference?

As I have shown in previous articles, for the last five years states have decreased their spending on public colleges and universities. This has resulted in significant increases in tuitions and fees across the board. As the fees moved higher for out-of-state students, the schools began losing those students as well as potential students. The competition for out-of-state students has heated up and in order to attract students the tables were turned.

These Schools Tried Everything

Without public support, the schools sought out creative funding sources. Some schools are now selling the naming rights to their buildings and sport arenas as a way to raise money.

This new trend is not just limited to public universities. The same report also showed how for-profit colleges have also reduced their costs by 2.2% to $15,386 for 2012-2013 school year.

As you can see, determining the best value for your student is not as easy as just staying within your state boundaries.  Rather, a college bound student must evaluate all aspects of what a school is offering in their financial package. What this means is there's is a good possibility your student could end up attending a top-level university for a cost that far less than going to the local state university.

My goal for your student is to help them find the best possible fit in a college or university which is also comes at the right price. There is no reason your student can’t have the best of all worlds. Come find out more about the hidden secrets and give your student the best chance of success by attending my next FREE workshop. Sign up now!

Tags: college planning abc, College Planning News, cost of attending college, Manuel Fabriquer, attending college, cost of college

What Do You Get the Graduating High School Senior?

Posted by Manuel Fabriquer on Thu, Jun 27, 2013 @ 6:00 AM

college technology

What do you get the graduating high school senior who has everything?  After all, high school seniors usually have all the latest clothing and gadgets, so it can be difficult to find something they don’t already own.  Yet, we all want to give that special student something that will make a difference in their lives.  This is especially true when it comes to close family and friends. 

The 529 Plan

Now it is possible to make a third party monetary contribution to some 529 plans.  Through a 529 plan, a student can save money in a tax favorable way to pay for college tuition and related costs.  In essence, you could contribute to a 529 plan whether the student just completed kindergarten or high school.

There are some new websites that have recently come online that allow third party contributions and even provide parents with a way to solicit gifts to their 529 plan.  However, parents should be aware that there are problems associated with these websites such as:

  • Problems with factual inaccuracies
  • Difficult to understand terms and conditions
  • High fees associated with the program
  • No help in selecting the right program

As with any financial instrument, it is recommended that you receive advice and direction on how to best maximize your investment. 

We are Here to Help

Should you be interested in learning about a 529 plan or perhaps other vehicles that can help your student pay for college, call our office today.  We have information that can be tailor fit match your needs and particular time frame.  We will navigate you to the best solution that will get you where you want to go.  Call today and don’t forget to also check out my next FREE workshop where I cover how to pay for college without going broke!


Tags: College Funding, cost of attending college, money for college, Saving for college, Manuel Fabriquer, College Admissions, attending college, Paying for college, cost of college

How to Make Sense of College and Financial Aid Award Letters

Posted by Manuel Fabriquer on Tue, May 28, 2013 @ 6:00 AM



describe the imageSo, now your student has written and submitted their essays, taken the SAT’s, and sent in their applications.  In comes the acceptance letters and financial aid offers.  As is often the case, several of these letters will describe various aid packages that available- each being unique.  The big question is how to determine which college will provide your student with the biggest return on their investment?

The problem lies in being able to decipher what is actually being presented.  Unfortunately, colleges and universities are not required to utilize a standard format when describing their financial aid packages.  This occurs despite the availability of using the U.S. Department of Education’s financial aid shopping sheet.  Currently, there are approximately 6000 colleges in the U.S., but only 700 are utilizing this format.  You can find a copy of this template by going to:

Where the Pitfalls Exist

When reviewing the various financial aid award letters, it is important that you take into account all the costs associated with attending that particular school.  This will help you compare accurately between each school.  A common pitfall occurs when only tuition and fees are mentioned while other expenses such as transportation, books, and living expenses are omitted.

Another area to be careful of is the practice of colleges noting loans as “financial aid”, and even including the amount of loans that parents will need to take out in that aid.

A third important aspect to consider is how long the grants and scholarships will last.  It is not uncommon for grants and scholarships to be offered only during the freshman year, leaving the remaining years wide open.

It is equally important to consider that the average college has increased tuition and fees at private, nonprofit colleges by 13% since the 2007-2008 academic year.  At public four-year schools, the increase has been 27% for the same period.  Therefore, costs for these schools should be calculated over four and five years as many students are now taking more than four years to graduate. 

The Value of College Planning and Counseling

College planning is a lot more than just getting a student into the best college.  College planning must involve a series of other variables including:  graduation rates, job placement, net price after aid, and other costs that will ensure a good return on your investment.

As a college planner, I make sure to remove the emotional factors and completely analyze the facts that really matter.  This helps my clients' find the best fit, avoid costly mistakes, and maximize their return on investment. 

Get more information about current trends and strategies at my next Free College Planning Workshop.  Register today!

Tags: college consulting, college planning, College Planning News, cost of attending college, Manuel Fabriquer, cost of college

College Planning ABC shows what is behind rising college tuition

Posted by Manuel Fabriquer on Tue, Oct 2, 2012 @ 3:02 AM

Money falling resized 600
We have all heard how tuition costs are rising to all new levels.  In fact, The College Board has stated that since 1990 tuition and fees at four-year public schools have risen 150% to an average $8,244 per student this past academic year.

They also showed how during the same period federal grants and tax benefits rose 242%, to an average $4,292 per student.  Finally, The College Board and others have stated that student Federal loans have tripled during this same period.

Now, a new study published by the National Bureau of Economic Research has addressed one aspect of why tuitions may be rising.   This working paper is authored by Claudia Goldin of Harvard University and Stephanie Riegg Cellini of George Washington University.

In their research Goldin and Cellini have discovered an interesting relationship between increasing financial aid and the increase in tuition costs at for-profit schools. 

Their findings demonstrated how tuition at for-profit schools where students received federal aid was 75% higher than tuition at comparable for-profit schools whose students didn't receive any aid.

When they looked at the actual dollar amount the difference in the tuition increase between these two types of institutions averaged $3,390 more at institutions where students received federal aid.  It just happens to be that this increase is the same amount of federal aid that was available to these students.  In other words, the tuition increased to match what the students could borrow.

Economist Andrew Gillen of the Center for College Affordability and Productivity saw similar findings with regards to law-school tuition, which has climbed faster than undergraduate tuition.  Gillen believes a main factor was that law-school students can borrow much more from the federal government--as much as $138,500 over their lifetime.

These findings are not global and need to be taken into perspective.   For example, a spokesman for Education Secretary Arne Duncan said, the administration believes there is a link between federal aid and tuition increases at for-profit schools, but that it sees no such tie with public and nonprofit schools.

The fact remains that costs are increasing and there is no sign of them reducing in the near future.  Now more than ever it is critical for any family sending their student to college to fully understand how to finance that education.

At my College Planning Workshops, I review the most current information regarding the costs associated with the various universities.  What is more important, is the information I provide that shows you step-by-step how to reduce those costs so that you can send your children to college and still afford to retire.

Many families will not be aware of the many strategies that are available and end up sacrificing unnecessarily to educate their son or daughter. 

It just does not have to be that way.  Your first step is to sign up for my next College Planning ABC workshop.  Just click on the button below and I will see you there.

Click me

Tags: college planning abc, college planning, cost of attending college, money for college, cost of college

Going To College Just To Attempt A Degree

Posted by Manuel Fabriquer on Tue, Mar 27, 2012 @ 1:50 PM

Recently, the Wall Street Journal looked into new research that brings into question the idea of attending any college for the sake of just trying to earn a degree.  The research looked into the question from the perspective of taking on student loans to fund this adventure.

The article is correct in pointing out that it is no longer a good idea to just attend college, paying for it with student loans, and not having an end in mind.  This concept is just too expensive given the costs of college. 

In past years, some students would attend college part-time while working using student loans to fund not only their education, but also some of their living expenses. If they did not graduate it was alright since they did learn something and had a chance to try.   

I remember some families telling me that it was alright for their daughter or son to just try going to college.  After all, they will grow up a bit and stay out of trouble.  Well, that theory does not play out today given the increase in the costs of the education.  More than not this plan simply leaves many such students with little more than a heavy debt burden.

One area the article cautioned about were students considering for-profit universities with low graduation rates.  These schools traditionally have very low barriers to entry, so just about anyone can enroll.  However, completing the program of study and graduating is a whole different thing. 

These schools are quick to offer student loans as a way for students to pay for their programs. We have all seen the commercials on television depicting a working parent studying late at night, or a career oriented person walking into a graduation. 

What is not mentioned is that as these programs advance many of the students begin to drop out.  Sometimes, it is a result of not having the necessary educational foundations to handle the real college courses.  Other times, it is the lack of time and commitment that any educational pursuit will demand.  In the end, nine months after these students drop out they will have to begin making student loan payments despite not having finished their education.

So what does this all mean?

The fact is every student and their family’s need to have a plan, and not leave attending college to chance. When I work with students and their parents we look into several key areas in order to determine the best options. 

We look at the major the student is considering and review the current information regarding employment prospects.  Together we examine the motivation of the student and find the best fit in a university to increase their success of graduating.  Believe it or not, even an Ivy League school can be the wrong fit for some students.

Finally, we look at strategic ways to minimize or eliminate the need for taking on student loans.  Sadly, many people believe that financial planning only involves student loans.  When my office works with you we look at various tools and techniques available.  Many times, parents are floored to realize they got their child into a prestigious college for less than it would cost to attend a state school.

So, I do agree with this article’s main point, attending college for the sake of attending is a waste of money.  There is a lot more that I can share on this issue and I welcome you to attend one of my workshops or call my office for more information.

Tags: strategies for college, college planning, attending college, cost of college

Stanford Raises Undergrad Tuition for the 2012-2013 School Year

Posted by Manuel Fabriquer on Wed, Feb 8, 2012 @ 5:00 AM

On Tuesday the board of trustees approved a 3% increase in tuition for undergraduate students enrolling for the 2012-2013 academic year.

This brings the total cost of attending Stanford to $54,406. Here is how the costs breakdown.  Tuition alone for undergraduates will be $41,250 and room and board will be an additional $12,271.

These increases are pretty much all encompassing as graduate programs will also be experiencing a 3% tuition increase.  However, the medical program will see an even higher increase at 3.5%.

Why The Increase?

Like most large organizations these days, the university is trying to balance the rising costs of salaries and health care and this is the reason for the increase.

Stanford’s announcement is not an isolated matter.  We can all expect other universities to make similar announcements.  This is why is vitally important that you attend one of my Free College Planning Workshops and learn the strategies available to pay for college without going broke.

You can find out about the next information packed college planning workshop by clicking here or calling (408)918-3068

Tags: College Planning News, cost of college