Loans and how to apply
Financial aid packages at Reed include a student loan. The amount of packaged student loan for domestic, first-year students is $3,500; $4,500 for sophomores, $5,500 for juniors, and $5,500 for seniors.
Reed’s Financial Aid Office will review your eligibility for all types of aid including loans and offer you the most attractive loan option available based on your financial need.
There are three main types of educational loans:
- Federal Direct Student Loans
- Federal Direct Parent PLUS Loans
- Student Alternative/Private Loans
If you are looking for additional financing options (after you have exhausted your federal student loan eligibility), you may wish to consider a student alternative loan.
FEDERAL DIRECT STUDENT LOANS
Federal Direct Student Loans are low-interest loans provided to students by the federal government. The Direct Loan offered in your financial aid package may be Subsidized or Unsubsidized or a combination of both.
Effective July 1, 2020 through June 30, 2021, the annual interest rate for the subsidized and unsubsidized loan is 2.75% for undergraduate and 4.30% for graduate borrowers. Monthly repayment is usually made over a period of 10 years and begins six months after graduation or when the student ceases to be enrolled at least half time.
- Subsidized Loan – need-based loan where no interest accrues while the student is enrolled in school (at least half time).
- Unsubsidized Loan – not based on need where interest accrues while the student is enrolled. The student can choose to pay the interest as it accrues or can choose to have the interest capitalized (added to the principal balance).
The Direct Student Loan origination fee for loans disbursed between 10/1/19 and 10/1/20 is 1.059% which is deducted from the loan at the time of disbursement. For example, if you are borrowing $1,000, approximately $990 will be disbursed to you on your student account.
Direct loans are disbursed to the student’s account each term after all required documentation is received. First-time borrowers must complete a Direct Loan Master Promissory Note (MPN) and Entrance Counseling.
How to apply for your Federal Direct Subsidized/Unsubsidized Loans (First-time borrowers only):
- Go to studentaid.gov
- After logging in with your FSA ID Username and Password, you will need to complete 1) Entrance Counseling and the 2) Master Promissory Note for Subsidized/Unsubsidized Loans.
FEDERAL DIRECT PARENT LOAN (PLUS)
The Federal Direct Parent Loan (PLUS) can be used by a parent to borrow on behalf of dependent undergraduates. The parent borrower may be the student’s mother, father, or stepparent (if the stepparent’s information was reported on the FAFSA). While parents of all income levels are eligible to apply, a credit check is required and performed by the U.S. Department of Education.
Eligible parents may borrow up to the cost of attendance minus any other aid received by the student.
Effective July 1, 2020 through June 30, 2021, the annual interest rate for the Direct PLUS Loan is 5.30%. Interest accrues during all periods beginning on the date of the loan’s first disbursement. PLUS Loans disbursed between 10/1/19 and 10/1/20 are also subject to a 4.236% origination fee which is deducted from the loan at the time of disbursement. For example, if you borrow $1,000, approximately $956.00 will be disbursed to your student's account.
Repayment begins within 60 days after the loan funds for the year are full disbursed. Parent Direct PLUS Loan borrowers may have the option of deferring repayment.
How to apply for a Parent PLUS Loan -
- Go to studentloans.gov
- Log in with your Parent FSA ID Username and Password
- Complete the application process including the PLUS MPN
STUDENT ALTERNATIVE/PRIVATE LOANS
Private student loans are loans from a lending institution; they are not part of the federal government student loan programs. Private loans are generally more expensive than federal loans and have repayment terms that are less flexible.
They should be used only when all other options have been exhausted. It is important to check federal loan programs and research all possibilities for scholarships, grants, and work before you borrow from a private loan program.
If you are receiving need-based federal or financial aid funds, you are required by government regulations to notify the financial aid office of the amount that you are borrowing in private loan funds. Many private programs will require certification of your eligibility by the financial aid office before approving the loan; others will not require certification. In either case, it is important that you notify the financial aid office, since your loan must be included in our evaluation of your overall eligibility for financial aid funds.
Below are links to the private student loan lenders that Reedies have borrowed from in the past 3 years. Reed does not recommend or endorse any particular lender.
- Citizens Bank
- College Ave
- CU Student Loans/LendKey
- EDvestinU (New Hampshire Higher Education Loan Corporation)
- Massachusetts Educational Financing Authority (MEFA)
- Minnesota Office of Higher Education (SELF)
- National Education TruFit
- NJCLASS Loan (Higher Education Student Assistance Authority/New Jersey)
- Rhode Island Student Loan (RISLA)
- Sallie Mae
- SoFi Student Loans
- Vermont Advantage
- Wells Fargo - NO LONGER OFFERING PRIVATE LOANS (effective December 2020)
What to look for when evaluating private loans:
• Interest Rate and Fees: What is the annual percentage rate (APR) on the loan? The APR is the annual cost of your loan; it includes interest and the effect of any fees and charges. APRs will differ depending on the terms of your loan and the amount of your loan. Make sure that you compare like loan amounts when you compare APRs so that you receive a true comparison. If the rate is variable, the APR may change during the life of the loan. What fees must be paid for the loan? When are the fees due? Some private loans deduct a fee before disbursement, while others add on a fee to the loan at repayment.
• Repayment: When does repayment begin? Some loans have a time limit on in-school deferment options. If you plan to attend graduate school, deferment options may not extend through your graduate study.
• Repayment Period: How long is the period you have to repay the loan? If your education costs require you to borrow large amounts, you may need a longer time to repay the loans.
• Cosigner: Does the loan require you to have a cosigner? Does the lender offer a cosigner release option after you make a required number of on-time payments?
• Repayment Incentives: Does the lender reward you when you make payments on time? For example, does the lender reduce the interest rate for automatic payments? Does the lender offer an interest rate reduction after 24 or 48 consecutive on-time monthly payments? If benefits offered are conditional, can you meet the conditions?
• Loan Limits: Is there a maximum amount you can borrow? Does the loan have an annual or aggregate limit? Will these limits meet your needs?
• Interest Capitalization: What happens if you choose not to pay interest while you’re in school? If you choose not to pay the interest, it may be capitalized (added to your principal balance). When is the interest added? Annually? At repayment? If the interest is capitalized annually, the loan is more expensive than if interest is capitalized once at repayment.
• Customer Service: Contact lenders you are considering to see if you can get your questions answered in a timely and helpful manner. Are you comfortable with the quality of the customer service provided?
• Servicer: Does your lender sell their loans? Some lenders sell their loans to a third party servicer; others retain ownership throughout the life of the loan.