Student Loans: Types and How They Affect Your Repayment

Student Debt

In our last Money Matter’s post, we explained the components of the FAFSA award letter, which may leave some undergraduates overwhelmed.  What’s next?  Take a few deep breaths and start with a defense plan that includes student loans. 


This post will cover the most common types of student loans and what the repayment expectancy is for each.

Subsidized vs. Unsubsidized

Subsidized:  This type of loan is granted to undergraduates who show financial need, and it will not exceed that need amount.  Undergraduates must be enrolled at part-time or full-time status to receive this loan.  The student’s choice of a university determines exactly how much in subsidized loans can be borrowed each year.


  • As of July 1, 2016, the fixed interest rate is 76%

  • Graduate students do not qualify for subsidized loans.

  • There is a time limit for how long a student can receive subsidized loans. explains the word ‘subsidize’ as “pick up the check”.  Which is a great way to explain that the U.S. Department of Education will pay towards accrued interest on subsidized loans for at least half the time a student is enrolled in his/her university.


Unsubsidized:  This type of loan is granted to undergraduates and graduate students, and requires no proof of financial need.  Universities have the discretion to determine the borrowed amount for each student upon applying—tuition rates and other financial assistance may play a factor in the total approved unsubsidized loan.

  • As of July 1, 2016, the fixed interest rate for undergraduates is 76%

  • As of July 1, 2016, the fixed interest rate for graduates is 31%

  • There is no time limit for how long a student can receive unsubsidized loans.

  • There is a collective loan limit of $31,000 for unsubsidized loans.


Interest begins accruing at loan disbursement for unsubsidized loans and continues to accrue until the loan is paid in full.  If a student needs to defer loan payments, interest will still be charged.


Annual Borrowing Limits for Subsidized and Unsubsidized Loans

*Photo courtesy of

Stafford vs. Perkins vs. Parent PLUS Loans

Three of the most common loans opened by students are:  Stafford, Perkins, and Parent PLUS loans.


Stafford and Perkins loans are both offered by the U.S. Department of Education and must have a FAFSA application filed prior to the student’s upcoming academic year. 


*While Stafford loans contain subsidized and unsubsidized options, the Perkins loan is available only for students who show an exceptional need for financial assistance.  Students who qualify for the Perkins loan will have the necessary information outlined on their FAFSA award letter.


Parent PLUS loans are options for the parents of dependent undergraduate students.  These loans currently offer a 6.31% fixed interest rate (2016-2017 school year).


*Parent PLUS loans applications are filed by the parents of the undergraduate and it is the parent who assume repayment responsibilities.  The loans cannot be transferred to the student.


American Eagle Credit Union offers a low-interest, convenient Student Choice loan to cover any unmet gap in your financial aid.

Game Plan

The Game Plan for Repayment

You’re not alone in the student debt world—more than 43.3 million Americans have student loan debt, and the average 2016 graduates owes $37,172.


Yet student loans don’t need to feel like a burden—in fact, many universities provide financial classes or required financial aid meetings prior to graduation.  There are several ways to get a repayment game plan started:

  • Contact your loan servicer. There is a 6 month grace period after graduation prior to the beginning of repaying your loans.  Contacting your loan servicer before graduation gives you time to update your contact information and plan a budget for separate loans or see if it’s a better plan to consolidate.
  • Speak with your financial aid office. These are the same advisors who helped you obtain your scholarships and loans and often have advice or tips for repaying.
  • Develop a budget. It takes a lot of discipline to start budgeting right after graduation, but if you can figure out how much you’ll be repaying every month then you can start post-graduation life with less worries.

Prepare for financial success. 

First year receiving a FAFSA award letter?  Trying to prepare filing for the next school year?  Attend our Student Choice webinar:  Deciphering Your Financial Aid Award Letter, on Wednesday, March 22nd, starting at 1 p.m. and 6 p.m.

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