Understanding Student Loans At Indiana University

Indiana University offers a range of student loan options to help students finance their education. These include federal loans, such as the Federal Direct Loan, and private loans from banks and other financial institutions. The university recommends students first consider federal loans, which usually offer better loan terms and repayment options, before exploring private loans. International students are not eligible for federal loans but can explore other options, including loans from private lenders and loans from their home country. It is important for students to carefully consider their options and understand the financial implications of taking out loans to ensure they do not take on more debt than they can afford.

Federal vs. private loans

Federal student loans are provided by the US Department of Education and usually offer the best loan terms and repayment options. There are two types of federal loans: subsidized and unsubsidized. Students with ""exceptional financial need" may qualify for subsidized federal loans, while unsubsidized loans are available regardless of financial need.

Interest rates tend to be lower on federal loans compared to private loans. Federal loans also offer flexible repayment options, such as the ability to defer payments until after graduation. To qualify for a federal loan, you will need to complete and submit the Free Application for Federal Student Aid (FAFSA). The FAFSA will determine your Student Aid Index (SAI), which is used to calculate how much assistance you are eligible to receive.

Private student loans, on the other hand, are offered by banks and other financial institutions. They often have higher overall costs and fewer repayment options. Private loans are not based on a borrower's financial needs and usually require a credit check to prove creditworthiness. Private loans can come with higher borrowing limits than federal loans, and the repayment period may vary depending on the lender. While some lenders may allow you to defer payments until after graduation, others may require you to start repaying the loan while you are still in school.

It is important to note that both federal and private student loans must be repaid, regardless of whether you graduate or not. When deciding between federal and private loans, it is generally recommended to consider federal loans first due to their more favourable terms and lower interest rates.

Eligibility requirements

To be eligible for a student loan at Indiana University, you must meet the eligibility requirements. These requirements vary depending on the type of loan you are applying for and your personal circumstances.

Federal Student Loans

Federal student loans are available to undergraduate and graduate students. These loans are provided by the U.S. Department of Education and typically offer more favourable terms and repayment options than private loans.

To be eligible for a Federal Direct Loan, you must complete the Free Application for Federal Student Aid (FAFSA). The FAFSA is used to determine your eligibility for federal financial aid and includes questions about your financial situation, as well as your citizenship and marital status. You will need to reapply for the FAFSA each year to continue receiving financial aid.

Federal Direct Graduate PLUS Loans

Federal Direct Graduate PLUS Loans are available to graduate students. As with the Federal Direct Loans, you must complete the FAFSA to determine your eligibility.

Federal Direct Parent PLUS Loans

Federal Direct Parent PLUS Loans are available to parents or stepparents of dependent undergraduate students. Again, the FAFSA must be completed to determine eligibility for this type of loan.

Private Student Loans

Private student loans are available through banks and other financial institutions. These loans typically have higher overall costs and fewer repayment options than federal loans. Requirements vary depending on the lender, but in general, you must have a good credit history or a co-signer with good credit history. You must also be enrolled at least half-time, which is six credit hours for undergraduates and four credit hours for graduates.

International Students

International students are not eligible for U.S. federal loans but can explore other options, such as loans from their home country or private lenders. Private loans from U.S. lenders will likely require a co-signer who is a U.S. citizen or permanent resident.

IU Miller Loan

The IU Miller Loan is available to all IU students in their final year of their degree program. To be eligible, students must:

• Be an undergraduate, graduate, or professional student
• Be in the final year of their degree program
• Have a cumulative program GPA of at least 2.75
• Have exhausted all other possible funding options

Repayment options

The repayment options available to you depend on the type of loan you choose. Some loans require repayment while you are still studying, while others start after you graduate. All loans must be repaid.

Federal Loans

Federal student loans usually offer the best loan terms and repayment options. They are based on the FAFSA (Free Application for Federal Student Aid) and are the most common type of federal aid available to students who demonstrate financial need. Government loans can be "subsidized" (where the interest is paid for you until six months after you graduate) or "unsubsidized" (where the interest begins accruing right away).

Private Loans

Private student loans often have higher overall costs and fewer repayment options. They require separate applications and carry varying terms and conditions set by the lender. They are usually more expensive than federal loans.

IU Miller Loan

The IU Miller Loan is available to all IU students in their last year of their degree program. The loan amount is determined by the OIS Scholarship Committee, with a maximum of $5,000 per semester, not exceeding $10,000. Repayment begins 9 months after ending studies and the repayment period will not exceed 10 years. To be eligible, students must be in their final year, have a cumulative program GPA of at least 2.75, and have exhausted all other funding options.

Short-Term Loans

If you have an emergency or unexpected expense, you can apply for a short-term loan of up to $400 through IU. To qualify, you must be enrolled at IU and not have any past due balances with the Office of the Bursar.

Loan Consolidation

If you have multiple federal student loans, you may be able to consolidate them into a single loan with a lower monthly payment. However, if you extend your repayment period, you may end up paying more interest over time, and you may lose some discharge benefits.

Interest rates

Federal Student Loans

Federal student loans are offered by the U.S. Department of Education and are generally considered the most affordable option. These loans are based on the completion of the Free Application for Federal Student Aid (FAFSA). Federal loans can be subsidised or unsubsidised. In the case of subsidised loans, the government pays the interest on the loan until six months after the student graduates. This means that during the in-school period and the grace period after graduation, the loan does not accrue interest, making it a more cost-effective option. On the other hand, unsubsidised loans start accruing interest right away, so the overall amount to be repaid is higher.

Private Student Loans

Private student loans are available from banks, credit unions, and other financial institutions. These loans typically have higher overall costs and fewer repayment options compared to federal loans. Interest rates on private loans can vary significantly, and it is important for borrowers to carefully review the terms and conditions before committing. Private loans also require a credit check, and in some cases, borrowers may need to find a co-signer.

Loan Consolidation

It is worth noting that Indiana University students with multiple federal student loans have the option to consolidate them into a single loan. Loan consolidation can result in a lower monthly payment and a fixed interest rate for the life of the loan. However, extending the repayment period through consolidation may lead to paying more interest over time.

Managing Interest Costs

To minimise the financial burden of interest, it is advisable to explore all grants, scholarships, and other forms of financial aid before taking out student loans. Additionally, Indiana University offers resources like IU MoneySmarts to help students plan their finances, including managing student loan payments.

Loan exit counselling

You will receive an email explaining how to get started with your exit counselling. You can then log into StudentAid.gov with your FSA information and confirm your details. On the Account Dashboard, click 'Manage Loans' and then select 'Complete Exit Counselling'. From the Exit Counselling page, click 'Start' and visit each section, completing the 'Check Your Knowledge' questions.

Federal Perkins Loans are managed by University Collections and Loan Services, and the exit counselling process is different. You must complete Perkins exit counselling in person by visiting the Office of the Controller in Parsons Hall 100. Failure to do so will result in a hold being placed on your student account, preventing graduation and access to academic transcripts.

If you have more than one federal student loan, you may be able to consolidate them into a single loan with one monthly payment. This payment can be much lower than your total monthly payments on multiple loans, and the interest rate is fixed for the life of the loan. However, you may lose some discharge (or cancellation) benefits, and if you extend your repayment period, you may pay more interest over time.

Frequently asked questions