New York Student Loan Programs
Take Advantage of the Benefits
The New York State Higher Education Services Corporation (HESC) was created as part of New York’s state government. It manages New York’s student financial aid program and offers financial counseling to college-bound students. Currently, the state of New York does not make any student loans through HESC, but HESC does act as the servicer for old Federal Family Education Loans and loans made through the New York Higher Education Loan Program.
HESC has also set up a website called Go College New York! to organize its material on financial counseling, and if you follow the recommended steps to help evaluate your financial situation in comparison to the cost of college, you will end up with a very clear idea of the resources you need and where to find them.
Federal Loans For New York Students
The federal loan programs, Direct and Perkins, are the cheapest alternatives if you discover you need to borrow money for school. Federal loans from the U. S. Department of Education (USDOE) tend to offer lower interest rates and more favorable terms, so you should try to borrow as much as you can through the federal programs before turning to private lenders. Obtaining a federal loan starts with filling out the Free Application for Federal Student Aid (FAFSA), and if you followed the steps laid out by HESC you will already have completed that annual process.
Direct Subsidized And Unsubsidized Loans
The Direct Loan Program has replaced Federal Family Education Loans, and it includes four types of loans to cover different circumstances.
The Direct Subsidized loans go to undergraduates who demonstrate financial need on the FAFSA, and your school’s financial aid office will decide how much money you need to borrow (which is also true of Direct Unsubsidized loans). USDOE pays the interest on your Direct Subsidized loan while you are enrolled at least half-time and while the loan is in deferment status.
USDOE also pays interest during your grace period (the first six months after leaving school) for any Direct Subsidized loan that was not first disbursed between July 1, 2012 and July 1, 2014. If your loan falls into that category, you may still choose not to pay during the grace period, but that interest will be capitalized (meaning added to the balance of your loan so that it draws interest of its own).
Direct Unsubsidized loans differ in that no showing of financial need is necessary, and loans are extended to both undergraduates and graduate students. Because Direct Unsubsidized loans are expected to go to more affluent students, they collect interest at all times. There are still times when you can elect not to pay interest (while attending school, during grace periods, after receiving a deferment or forbearance), but the unpaid interest will be capitalized.
Direct PLUS Loans
Direct PLUS Loans are given to the parents of dependent undergraduates and to graduate students. The Direct PLUS loans, unlike the Subsidized and Unsubsidized, require acceptable credit history, and they have a fixed interest rate (currently 7.9%). The amount of any Direct PLUS loan will be set by your school’s financial aid office based on your cost of attendance after your other financial aid has been subtracted.
The credit history stipulation requires some explanation: there are two possible ways to obtain a loan despite having a troubled credit record. First, you can try documenting the extenuating circumstances that caused your financial difficulties. If that standard proves too exacting (and it may), you can propose a creditworthy cosigner for the loan, which USDOE calls an endorser.
There is one limitation: a parent with a poor credit history cannot use the child who needs the loan as the endorser.
The Perkins Loan program is structured differently, in that federal funding has been provided to individual colleges and universities, who then lend it out on the government’s behalf. Each participating school, therefore, has limited funding, replenished only when previous borrowers make payments. That means to improve your chance of securing a Perkins loan, you must apply as early in the year as possible, because when the money runs out for the year your school will close its lending period.
The Perkins loan carries a fixed interest rate of 5% (the 2013 number), it is available for undergraduates, graduate students, and professional students, and you must have what is called exceptional financial need to qualify. If your calculations indicate you will need a Perkins loan, make sure you choose a school that takes part in the program so that you can take advantage of its low rate.
How To Find A Private Lender: Ask A Financial Aid Professional
There are two traditional routes to finding a private loan to complete your financing for college. First, try consulting the banks with which you and your parents maintain relationships, to see whether they offer any student loan options. If you already do business with a lender, you may be able to negotiate more advantageous terms than you would as a first-time customer.
The second method is to review the financial aid information offered by the New York school you plan to attend. One example is Fordham University, which provides a helpful guide to private lenders with which the school often works. You should check the terms of the student loans listed for each bank to make certain the information is current.
If you have questions about possible selections, you can contact the financial aid office directly for personalized assistance.