What kinds of student loans are available?
Subsidized Federal Direct Stafford Loans (need-based)
Subsidized Direct Stafford Loans are available to undergraduate students with financial need. It is subsidized because the government pays the yearly interest while you’re in school. The amount a student can borrow each year increases with grade level.
Unsubsidized Federal Direct Stafford Loans (not based on need)
Unsubsidized Direct Stafford Loans are sponsored by the government, but are not based on financial need. The amount you can borrow each year varies depending on grade level, dependency status, and other factors. Interest on these loans will accrue while you are in school, and if not paid before repayment begins, will be added to the original amount borrowed on this loan. It is strongly encouraged that you at least make interest-only payments while you are enrolled in school.
Direct/PLUS Federal Loans for Parents, Graduate and Professional Students
PLUS Loans are federal loans for graduate and professional students and parents of dependent undergraduate students. Interest will accrue while the student is enrolled and will be added to the original amount borrowed on this loan. It is strongly encouraged that you at least make interest-only payments while you are enrolled in school.
The government sets the interest rate annually effective July 1 and the origination fee rate annually effective October 1. For more info on Federal Student Loans, click here.
Private student loans
Private student loans are credit-based loans offered through a bank, credit union or state agency. Usually, the student is the borrower and will need a creditworthy co-signer, such as a parent. Below are private lenders who are in the Maine Private Education Loan Network.
The Finance Authority of Maine (FAME) Loans:
The Maine Loan—Maine’s Alternative Student Loan and the Maine Medical Loan
Maine-based private student loans that have a fixed interest rate option. Current interest rate details and repayment options can be found at maineloan.com.
Other FAME Education Loans
Should I look for a student loan with a fixed or a variable interest rate?
It depends, consider…
Fixed rate student loans:
- May carry a higher rate than variable rate student loans.
- Are not impacted by interest rate changes.
- Provide consistent monthly payments for the life of the loan.
Variable rate student loans:
- Are impacted by interest rate changes.
- Rates can change as frequently as monthly or quarterly and could change significantly over the typical repayment period of 10 to 15 years.
- May actually be less expensive than a fixed rate loan depending on the interest rate environment over the payback period.
Which type of rate, fixed or variable, is right for me?
It depends. Say you can pay off your student loan debt quickly—a variable rate student loan may be a cost-saving solution if the rate is lower than the available fixed rate, and does not increase above the available fixed rate during the repayment period. Just remember, the longer it takes you to pay off the loan, the more opportunity there is for variable interest rates to change. You may lower the risk of your interest rate increasing by looking for a lender that caps variable rates.
A fixed rate student loan may make it easier to plan and budget for since your monthly payment will remain the same for the life of the loan.
How are variable interest rates determined?
Variable interest rates are often tied to common indices like the Prime Rate or LIBOR (London Interbank Offered Rate), and can change as frequently as every 30 to 90 days. For example, for loans with rates tied to the Prime Rate, when the Prime Rate goes up, the interest rate of that loan subsequently rises and when the Prime Rate goes down, the interest rate will subsequently decrease.
Are fixed rates stable (remain the same) through the life of the loan?
Yes. The fixed interest rate remains constant throughout the life of the loan. In a rising interest rate environment, this can be comforting. In a decreasing interest rate environment, this can be concerning.
What information will I need to complete my application?
For both the borrower and co-borrower:
- Social security number
- Date of birth
- Phone number
- Email address
- Current and prior addresses
- Monthly income
- Housing costs
- Employment information
What is the estimated time it takes from date of online loan application to approval of the loan?
The online application takes approximately 40 to 60 minutes to complete and initial approval is often determined at that time. There may be some loans that require additional review or income verification before receiving a final approval.
What is a credit score?
Before making a private loan, a bank or financial institution will attempt to determine your “creditworthiness.” Creditworthiness is the likelihood that you’ll pay back the money you borrowed in a timely and responsible manner. To help financial institutions determine your creditworthiness, they will access your credit report and credit score. The most well-known credit score is known as a FICO® Score. You will have three credit scores, one for each of the three credit reporting agencies: Experian, TransUnion and Equifax. A credit score can range from 300 to 850, with 850 being the highest score available. The higher your credit score, the more likely you are to be approved for credit or offered favorable loan terms. For more information, visit www.annualcreditreport.com.
If my parents or I have placed a credit freeze on our credit reports, will it impact my ability to apply for student loans?
Private and alternative student loans are credit-based and will be impacted by a credit freeze. You will need to remove the freeze to allow lenders to check your credit history.