All About Education Loans
Financial aid packages at Yale include an amount called “self-help” that is the responsibility of the student, and it is met with term-time work. The composition of self-help is completely customizable by the student. While it is possible to borrow the entire amount of self-help, a more prudent approach is to minimize the amount of borrowing. Our staff at Student Financial Services stands ready to help you make an informed decision about borrowing.
There may be other reasons to borrow, besides covering your self-help. For example:
- You may wish to borrow to replace a shortfall in your summer savings. Some students opt to undertake an unpaid internship during the summer, thus preventing them from saving any funds from a summer job. Other students may have found it difficult to find a job.
- You may also borrow to cover additional expenses that are not included in your basic Cost of Education. Certain areas of study, like art, require purchase of paints, canvasses, and other supplies. Musicians may have to cover the costs of lessons. In other cases, books or travel expenses may be higher than the standard figures used in your Cost of Education.
- Your parents may wish to borrow to cover their portion of the family contribution.
Student Loans
There are four student loan programs, three of which are available for Yale undergraduates through the Student Financial Services Office: the Federal Direct Subsidized Loan, the Federal Direct Unsubsidized Loan, the Yale Student Loan, and the Federal Perkins Loan, which is currently unavailable. All of these loans are in the student’s name and are the student’s responsibility to repay. Alternative/Private loans are discussed below as well.
Federal Direct Subsidized Loan | Federal Direct Unsubsidized Loan | Federal Perkins Loans | Yale Student Loan | Federal Direct PLUS Loan | CT FELP Loan
Type 1: Federal Direct Subsidized Loan
Direct Subsidized loans are for undergraduate students only with demonstrated financial need as determined by federal regulations. No interest is charged while a student is in school at least half-time, during the grace period and during deferment periods. For loans disbursed on or after July 1, 2012 the interest rate is 6.8%. There is a 1.0% origination fee with an up-front rebate of .5%.
| Federal Direct Loan (Subsidized) | |
|---|---|
| Eligibility |
|
| Interest Rate | Fixed at 6.8%. |
| Loan Fees | 1% origination fee. |
| Repayment | Six month grace period; maximum 10 years |
Type 2: Federal Direct Unsubsidized Loan
This is a guaranteed student loan for students who qualify for federal financial assistance ( U.S. Citizens and Permanent Residents) but do not show need. Such students without need will qualify for this unsubsidized loan and they will be responsible for the interest payments on the loan while in school (the interest may be paid monthly or it may be capitalized-adding the accrued interest to the principal loan amount when going into repayment). The unsubsidized Direct Loan has a fixed interest rate of 6.8%, an origination fee of 1%. Borrowers receive a six month grace period, which means that you do not have to begin repayment until six months after you graduate or when your enrollment drops below half-time status. There are no payments due while you are enrolled in school, during your grace period, and during any approved deferments (e.g. attendance at graduate school). The standard repayment term is 120 months with a $50 minimum monthly payment.
| Federal Direct Loan (Unsubsidized) | |
|---|---|
| Eligibility |
|
| Interest Rate | 6.8% |
| Loan Fees | 1% origination fee with an upfront rebate of .5% |
| Repayment | Six month grace period; maximum 10 years. Payment of interest begins at disbursement but may be capitalized. |
Loan Limits for Loans Disbursed on or after July 1, 2010
| Dependent Students | Base Amount | Additional Unsubsidized Loan Amount |
|---|---|---|
| Freshman | $3,500 | $2,000 |
| Sophomore | $4,500 | $2,000 |
| Junior or Senior | $5,500 | $2,000 |
| Independent Undergraduate and Dependent Students Whose Parents Cannot Borrow a PLUS loan | Base Amount | Additional Unsubsidized Loan Amount |
|---|---|---|
| Freshman | $3,500 | $6,000 |
| Sophomore | $4,500 | $6,000 |
| Junior or Senior | $5,500 | $7,000 |
Aggregate Loan Limits (effective July 1, 2011)
Undergraduate dependent students can borrow a maximum of $31,000 (no more than $23,000 of which can be subsidized).
Undergraduate independent students can borrow a maximum of $57,500 (no more than $23,000 of which can be subsidized).Type 3: Federal Perkins Loans
Based on current funding levels, Perkins is not available to undergraduate students. This is a federal student loan program for those students who qualify for need-based federal financial assistance and who first borrow the maximum Federal Direct Loan before requesting a Perkins. Interest does not accrue while you are in school; during the repayment period the interest rate is 5%. The aggregate limit for undergraduates is $20,000 and the maximum annual Perkins loan is $4,000. Borrowers receive a nine-month grace period, which means that you do not have to begin repayment until nine months after you graduate or your enrollment drops below half-time status. There are no interest or principal payments due while you are enrolled in school, during your grace period, and during any approved deferments. Perkins loans have certain cancellation benefits that may be available to you. The standard repayment term is 120 months with a $40 minimum monthly payment.
| Perkins | |
|---|---|
| Eligibility | U.S. Citizen or Permanent Resident with need |
| Interest Rate | 5% |
| Loan Fees | No Fees |
| Loan Amount | $4,000 per year limit; $20,000 total undergraduate aggregate limit. |
| Repayment | Nine month grace period; maximum 10 years |
Type 4: Yale Student Loan (YSL)
This is a student loan for those with financial need who do not qualify for federal or Canadian student loans. This loan requires a cosigner who is a citizen or permanent resident of the United States. The cosigner residency requirements can be waived under certain circumstances. The Yale Student Loan has a fixed interest rate of 7.5%. Since the YSL is based on financial need, the amount is limited to the amount of the student’s self-help less outside scholarships, other need-based loans, and term-time earnings. You will receive a six-month grace period, which means that you do not have to begin repayment until six months after you graduate or your enrollment drops below half-time status. You will be responsible for the interest from the disbursement of the loan. You may make monthly payments of interest while you are in school or, if you so choose, you may “capitalize” the interest by allowing it to accrue and by adding it to your principal when you go into repayment. The standard repayment term is 120 months with a minimum monthly payment of $50.
| Yale Student Loan | |
|---|---|
| Eligibility | International students and students not otherwise eligible for Federal Direct Loans or Perkins |
| Interest Rate | 7.5% |
| Loan Fees | No Fees |
| Loan Amount | $3,000 per year |
| Repayment | Six month grace period; maximum 10 years |
Parent Loans
The two family loan programs that most families at Yale utilize are the Federal Direct PLUS (Parent Loan for Undergraduate Students) Loan and the Connecticut FELP (Family Education Loan Program) Loan. Some states and other organizations have developed loan programs as well. Home equity loans and borrowing against pension plans are other options that may be advantageous for your parents.
Federal Direct PLUS Loan
To be approved for the PLUS Loan, the borrower must demonstrate good credit and be a U.S. Citizen or a Permanent Resident. Those parents eligible to borrow under the PLUS program can borrow up to the cost of education less any other financial aid. PLUS loans carry a fixed interest rate of 7.9%. There is an origination fee of 4%. Repayment begins after the disbursement of the loan; the repayment term is typically 120 months.
| PLUS | |
|---|---|
| Eligibility | Credit-worthy parents |
| Interest Rate | 7.9% |
| Loan Fees | 4% origination fee with an upfront rebate of 1.5% |
| Loan Amount | Cost of education minus other financial aid |
| Repayment | Begins at disbursement; maximum 10 years |
CT FELP Loan
The CT FELP Loan is designed to help families fund their contributions. It is available to Yale students and credit-worthy co-applicants. You may borrow any amount from $2,000 (the minimum) up to the cost of education less any financial aid regardless of state of residence. The current fixed interest rate is 6.80% and a reserve fee of up to 3% will be deducted from the loan proceeds. Repayment begins at disbursement; repayment terms are up to 140 months with interest-only payments while you are in school and during a six-month grace period.
| CT FELP | |
|---|---|
| Eligibility | Yale students and credit-worthy co-applicants |
| Interest Rate | 5.95% |
| Loan Fees | 3% reserve fee |
| Loan Amount | Cost of education minus other financial aid; $2,000 minimum |
| Repayment | Interest-only payments begin at disbursement; payments of principal and interest begin after a six-month grace period; maximum 140 months. |
Alternative Loans
In some cases, the various student and parent loans available through our office might not be enough to meet your borrowing needs. In such situations, there are various “alternative” or “private” loans (meaning that they are not federally guaranteed or offered from Yale funds). Many banks and other lending institutions provide alternative loans. We recommend that you use these loans sparingly and only after discussing your particular situation with staff at the Student Financial Services office. You can refer to Yale's student loan information webpage for additional information and possible lenders.
We encourage you to consider your borrowing choices carefully. More information about the loans mentioned in this document can be obtained by visiting the Student Financial Services Center.
