Departing the Hill in debt
Geoff Malick
Issue date: 4/22/09 Section: Class at Colby
This May, as over 500 seniors receive their diplomas and begin their life after Colby, roughly 40 percent of them will have debt. Leaving the Hill with finances in the negative and Colby still not fully paid for seems like an unsettling situation, but for 200 graduating seniors, student loans have made it a reality.
Most Colby borrowers use federal programs such as the Stafford Loan and the Perkins Loan. These allow students to borrow with relatively low interest rates compared with loans from the private sector. The unsubsidized Stafford Loan has a 6.8 percent fixed rate, whereas the federally subsidized Stafford Loan has a 6.0 percent fixed rate. The unsubsidized loan is available to anyone, as long as he or she fills out the FAFSA (Free Application for Federal Student Aid). The subsidized Stafford Loan is offered to students based on demonstrated need, determined by the school in which they are enrolled. Besides the lower interest rate, this loan allows larger amounts to be borrowed, as well as interest accruement and payment to be deferred, until after six months of leaving school.
The Federal Perkins Loan is a need-based student loan offered by the U.S Department of Education. With its fixed five percent interest rate, in-school deferment and nine-month grace period, it is generally considered to be a more student-friendly loan than the Stafford. The college or university distributes the loans with government funds given to them in a package that also includes money for work-study programs and grants.
Federal loans, however, are not the only options. The Maine Loan, for students from the state of Maine, requires a co-borrower such as a parent or guardian and tends to have higher and more variable interest rates. Private loans, offered by banks and loan agencies, also tend to have higher interest rates, as well as no deferment or grace period. Some of these are signature loans, which require no parent signature but have interest rates of upwards of 10 percent.
Most Colby borrowers use federal programs such as the Stafford Loan and the Perkins Loan. These allow students to borrow with relatively low interest rates compared with loans from the private sector. The unsubsidized Stafford Loan has a 6.8 percent fixed rate, whereas the federally subsidized Stafford Loan has a 6.0 percent fixed rate. The unsubsidized loan is available to anyone, as long as he or she fills out the FAFSA (Free Application for Federal Student Aid). The subsidized Stafford Loan is offered to students based on demonstrated need, determined by the school in which they are enrolled. Besides the lower interest rate, this loan allows larger amounts to be borrowed, as well as interest accruement and payment to be deferred, until after six months of leaving school.
The Federal Perkins Loan is a need-based student loan offered by the U.S Department of Education. With its fixed five percent interest rate, in-school deferment and nine-month grace period, it is generally considered to be a more student-friendly loan than the Stafford. The college or university distributes the loans with government funds given to them in a package that also includes money for work-study programs and grants.
Federal loans, however, are not the only options. The Maine Loan, for students from the state of Maine, requires a co-borrower such as a parent or guardian and tends to have higher and more variable interest rates. Private loans, offered by banks and loan agencies, also tend to have higher interest rates, as well as no deferment or grace period. Some of these are signature loans, which require no parent signature but have interest rates of upwards of 10 percent.
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