2
Eligibility: U.S. citizen/permanent residents; full/
part-time students.
Subsidized: For students with financial need, as
determined by the FAFSA and school costs.
Unsubsidized: For students without financial
need.
Repayment Term: Up to 10 years for standard
repayment. Graduated, extended, and income-
driven repayment options also available.
Deferment, forbearance options, and other
benefits apply.
Grace Period: 6 months
How to Apply: Complete the FAFSA by your
school’s deadline. Also, complete an additional
application, known as a Master Promissory
Note, and complete entrance counseling to
accept your award.
Learn More: studentaid.gov/understand-aid/
types/loans
Federal PLUS Loan
Description: Loan funded by the U.S. Dept.
of Education and intended for parents of
undergraduate and graduate students.
Rate: Rates are fixed and are set each year
in May based on the 10-year Treasury bill plus
a markup. For the 2024/2025 academic year,
PLUS interest rate is 9.08%
Fees: 4.228% fee (through 9/30/2024)
deducted from amount disbursed to the school.
Eligibility: U.S. citizen/permanent resident;
parent of dependent undergraduate or a
graduate student. A credit check is required.
Amount: Up to the difference between college
costs and total financial aid received.
Federal Direct Subsidized
& Unsubsidized Loans
Description: Loan for students funded by the
U.S. Department of Education. These loans come
in two forms: subsidized and unsubsidized.
Subsidized: No interest accrues while in school
for this need based federal loan.
Unsubsidized: While no payment is due as
well like the subsidized, while attending school
interest does accrue and will be calculated
into your monthly payment when repayment
begins. Monitor your unsubsidized Stafford loan
at studentaid.gov. to stay on top of accrued
interest. It is best to pay any interest that has
accrued on the unsubsidized loan prior to
graduation.
Rates: Rates are fixed and are set each year
in May based on the 10-year Treasury bill plus
a markup. For the 2024/25 academic year, the
undergraduate loan interest rate is 6.53% and
the rate for graduate students is 8.08%.
Fees: 1.057% fee through 9/30/2024. Fees are
deducted from the amount disbursed to the
school.
Annual Limits:
Dependent Student Limits
Year in School Subsidized Limit Total Limit
First $3,500 $5,500
Second $4,500 $6,500
Third-Fifth $5,500 $7,500
Independent Student Limits
Year in School Subsidized Limit Total Limit
First $3,500 $9,500
Second $4,500 $10,500
Third-Fifth $5,500 $12,500
Grad Students N/A $20,500
If you need student loans to help you pay for college, you are not alone. But it is important
that you conduct a thorough comparison of all of your options and make sure you
understand the rates, annual percentage rate (APR), fees, and terms of any loan program
you are considering. Below are available types of student and parent education loans to
help you get started.
Types of Student Loans
3
Repayment Term: Up to 10 years for standard
repayment. Loan repayment begins 60 days after
final disbursement. Parents or graduate students
can defer payments until 6 months after the
student leaves school. Interest accrues during this
period.
Minimum payment: $50/month
How to Apply: Submit the FAFSA by your school’s
deadline. The PLUS Loan can be included in your
financial aid award package. You can apply for
it and you do not have to accept the award if it
is part of your financial aid package. The Master
Promissory Note is also required.
Visit: studentaid.gov/understand-aid/types/loans
State-Based Education Loans
Description: An alternative loan for students and/
or parents available from State-based lenders.
Typically, these are not for profit lenders and offer
very competitive low, fixed rates.
Rates: Rates vary from program to program and
are often very competitive. Programs offered
usually include Undergraduate, Graduate, and
Parent Loans.
Eligibility: A credit check & cosigner are usually
required.
Amount: Loan limits vary by program.
Repayment Term: Repayment terms vary by
program.
How to Apply: Each lender will have specific
procedures for you to follow.
RISLA
- State-based education loans
from a non-profit lender
- Borrowers can be a student
with a cosigner or a parent
- Competitive, fixed interest rates
- Fast and easy application
- Zero fees
- No pre-payment penalties
- Learn more at risla.com.
Private Education Loans
Description: Private loans for students and/
or parents are available from a lender or bank,
with a variable or fixed interest rate. Variable
rates change as market conditions change so
they carry more risk. When your interest rate
changes on a variable rate loan, your monthly
payment also changes, so you need to have
flexibility in your budget. With private lenders,
the rate you receive is often based on your
credit score. Fees and rates vary considerably
based on the individual loan program and
lender.
Eligibility: A credit check is usually required;
cosigner is often required.
Amount: Loan limits vary by program.
Repayment Term: Terms vary by program.
How to Apply: Each lender has specific
procedures to follow.
4
Ask These 15 Questions Before
Borrowing a Student or Parent Education Loan
As a rule, you should always take advantage of any available scholarships and grants, and pay what
you can from income and savings before turning to education loans.
If you do need college loans, Federal Direct Subsidized and Unsubsidized Loans are a good place
to start. You must have financial need to be eligible for subsidized loan. If you do, your school will
include it in your aid package. If you do not have financial need, your school may award you an
unsubsidized loan. These federal student loan programs have annual and aggregate borrowing
limits.
If you still need to borrow after exhausting the above options, you may want to consider looking into
a state-based education loan, Federal PLUS Loan, or private student loan. Remember to limit the
amount you borrow!
Before you borrow, always ask each lender:
1. What is the Annual Percentage Rate (APR)?
2. Is the interest rate fixed or variable? (Variable rates can change monthly or annually.)
3. Is the rate I receive based on my credit?
4. What are the fees? (Types of fees: repayment, origination, default, late payment fees.)
5. What is the loan term?
6. What would my monthly payment be if I borrowed $X,XXX? Could my payment change?
7. When would my first payment be due?
8. How are loan funds disbursed? (To you or the school?)
9. What steps do I need to take to complete an application?
10. How long does it take to process an application?
11. Are there loan limits? Annual? Aggregate?
12. Who is eligible for this loan?
13. Do I need a cosigner?
14. What deferment and forbearance options are available to me?
15. If times get tough for me, are their income-based repayment options?
5
With college costs on the rise and often
exceeding $50,000, college has become
increasingly more difficult to afford. Often times,
income, assets, and savings, including education
savings plans, are not enough to cover your
family’s contribution. Financial aid can help
reduce the cost of college but families are still
often left with a considerable gap.
You should attempt to get as much free money
as possible before turning to loans to cover
college costs. You may receive grants and/
or scholarships in your financial aid package
from your school, but outside scholarships are
also available to help families fund a higher
education. Local scholarships are widely
available and are often easier to obtain than
national scholarships.
Visit
RIScholarships.org to search through a
comprehensive listing of hard-to-find local
scholarships.
TIPS FOR STUDENTS & PARENTS
How to Compare Award Letters &
Paying the Balance
Making sense of financial aid award letters can
be a daunting task for families as they make
college enrollment decisions. Currently, schools
don’t use a standardized form, so comparing
financial aid offers from multiple colleges isn’t
always easy. Use this guide and our worksheet
on page 7 to compare your awards and come
up with a plan to pay your tuition bill:
1. Add up your direct costs. Direct costs are
costs paid directly to the school, such as
tuition, fees (such as health insurance fees),
school-offered meal plans, and/or room and
board. Other costs related to your total cost
of attendance, such as books, travel costs,
computers, off-campus housing, and other
miscellaneous costs, are considered indirect
costs.
2. Calculate your total gift aid. Gift aid is free
to you and includes grants and scholarships.
The first step to comparing award letters is
to sum up your total gift aid. Subtract any
gift aid from your total direct costs. Do not
subtract work-study or loans from your total
costs since these are considered self-help
aid.
3. Consider what savings you have available
to help meet tuition costs.
Do you have
a 529 college savings plan or a Coverdell
savings account? Any other savings or gifts
meant for college? Subtract any resources
you will use from your direct costs.
4. Determine if you have any income
available to help pay college costs. Most
colleges offer a payment plan that allows
you to spread out the cost of tuition over
the course of a school year. Typically, a
payment plan administrator charges
Determining Borrowing Needs
6
a one-time enrollment fee. Be aware that making late payments can result in high fees.
Contact the college Bursar’s office or Financial Aid Office to get information regarding
payments plans.
5. Add up federal student loans. If the Federal Direct Subsidized or Unsubsidized Loan are
included in your financial aid award, decide if you would like to accept these awards.
Remember, you will have to pay interest on loans so you want to borrow as little as possible.
However, if you are taking loans, this is the place to start. Make sure you understand the
terms of these loans before accepting them. Subtract the amount you will accept from your
direct costs.
6. Think about how you will meet the difference
The remaining balance may be higher than
expected. Most schools are not able to meet
100% of your financial aid eligibility. If you plan
to borrow, whether it is a PLUS loan, state-based
loan, or private education loan, remember to
be a good consumer and explore rates, fees,
and terms. Factor your borrowing into the whole
picture when determining which aid package is
best for your family. Include borrowing for direct
costs and any indirect costs, such as books, fees
and transportation that would not be covered by
work-study earnings or other income and savings.
7. Add up the total amount you will need to borrow
at each school. This includes federal student
loans, PLUS loans, state-based loans, and private
education loans (remember to be careful when
comparing rates, terms, and fees for any of
these options before signing the note!) Make
adjustments if you still have a balance due or
have indirect costs you will need to cover with
loan funds.
8. When comparing award letters, focus on total
gift aid and the total amount you will need to
borrow for school. It is easy to get swept away
by a big financial aid offer. But remember, it isn’t
always the total award amount that is most
important. Pay attention to how much of your
financial need each college met and how they met your need. The less you need to cover
with loans, the better. Also, figure out if awards are renewable. Be wary of scholarships and
grants that are only good for your first year.
9. You do not need to accept the nancial aid package as is. Loans need to be paid back with
interest, so try to limit the amount you borrow by reducing your award amounts or declining
loans if you don’t need them. If you think you need more aid, you can always try to appeal
the offer. Make sure you have documentation to support your request.
10. Complete award acceptance forms by the deadline. If you do not, the aid awarded to you
may go to another student.
XYZ College University
Student Financial Aid Award Notification
Dear Student,
CONGRATULATIONS on your acceptance to XYZ College
University! On behalf of the university we are pleased to offer
you the following financial assistance towards your pursuit of
higher education.
Student Financial Aid Offer
Award Fall Spring Total
Acceptance
Federal Pell Grant $1875 $1875 $3750
yes no
College Work Study $750 $750 $1500
yes no
Institution Grant $500 $500 $1000
yes no
Direct Stafford
Subsidized Loan $1750 $1750 $3500
yes no
This award is the result of a review of your financial aid
application. Next to each type of award you have the opportunity
to accept or decline all, none or some of the financial assistance
offered to you. Please indicate your choices by circling the
appropriate response. Then sign and date the letter below and
return to the financial aid office within fifteen days. Two copies
of the letter are enclosed; please keep the second copy for your
records. If you have any comments, questions, concerns or any
unusual circumstances, please contact our office as soon as
possible. We look forward to seeing you in the fall.
Director
Financial Aid
XYZ College/University
(101) 555-1234
7
Don’t forget to come up with a plan for paying indirect costs, like books, transportation, and living
expenses. Visit us online at risla.com and use our College Calculator under Tools & Resources.
College 1 College 2 College 3 College 4
Enter college name on this line
Direct Costs
Tuition & fees
Room & board
Health insurance fees
Other fees
Total Direct Costs (A)
Gift Aid
Federal Pell grant
Federal SEOG grant
Federal TEACH grant
State grant
College grant
College scholarship
Outside scholarships & grants
Total Gift Aid (B)
Personal Resources
529 Plan
Coverdell savings account
Other college savings account
Parent savings & assets
Student savings & assets
Other
Total Resources (C)
Self-help Aid
Tuition payment plan
Direct Subsidized Loan
Direct Unsubsidized Loan
Federal PLUS Loan
State-based student loan
Private education loan
Home equity loan
Total Self-help Aid (D)
Summary
Total Direct Costs (A)
Total Gift Aid (B)
Amount Due to School (A - B)
Total Personal Resources (C)
Total Self-help Aid (D)
Gap (A-B-C-D)
Meeting College Costs Worksheet
8
What amount is the “right” amount
to borrow for college?
Many students are eager to sign whatever it
takes to go to their dream school. Unfortunately,
they often don’t understand how much it
will cost them after they graduate. Think
about your return on investment and what
will be affordable after graduation.
You don’t need to borrow the full amount listed
on your financial aid award letter. It is tempting to
borrow a little extra for something you want but
don’t actually need.
How much will you earn?
Do your research on entry level salaries in your
field of choice. Will you be able to afford your
monthly payments with the salary you will
make? Remember to account for all four years
of your education when estimating your total
borrowing needs. Too many students have a
“borrow now, deal later” attitude that ends up
getting them into trouble. A good rule of thumb is
to borrow (for all years of education combined)
no more than your expected starting salary after
graduation. Use a salary calculator to get an
estimate (risla.com/salary-calculator).
The average student graduates with over $30,000 in student loan debt. Many students and parents
are surprised to learn that they owe hundreds of dollars per month in student loan payments after
graduation. That’s why before you borrow, you should understand your options and learn how to
borrow responsibly.
Minimizing Financing Charges
Your goal should be to borrow at the lowest cost
possible, while still allowing for manageable
monthly payments. This means looking for the
lowest rates and fees and balancing those
with benefits of the loan and the length of the
repayment term. Being a good consumer and
comparing your options takes work, but the payoff
can make the effort well worth the time spent.
During your research, keep in mind shorter
repayment terms typically mean you will pay
less interest than if you had chosen a longer
repayment (assuming the rates are equivalent). As
an added bonus, shorter repayment terms in the
private loan market often have lower interest rates,
compounding your savings. Keep in mind that
although your monthly payments may be higher
with a shorter term, you’ll save more money in the
long run and pay-off years earlier, freeing up cash
for other things!
Does interest rate really matter? You may think it is
immaterial, but look at how much a 1% difference in
interest rate can really make!
Interest
rate
Number of
payments
Est. Monthly
Payment
Total Interest
Charges
Total Cost
of Loan
Assuming a $10,000 loan with zero fees and a 10-year term
4.0% 120 $101 $2,149 $12,149
5.0% 120 $106 $2,728 $12,728
6.0% 120 $111 $3,322 $13,322
7.0% 120 $116 $3,933 $13,933
8.0% 120 $121 $4,559 $14,559
9.0% 120 $127 $5,201 $15,201
10.0% 120 $132 $5,858 $15,858
11.0% 120 $138 $6,530 $16,530
12.0% 120 $143 $7,217 $17,217
Assuming a $10,000 loan with zero fees and a 15-year term
4.0% 180 $74 $3,314 $13,314
5.0% 180 $79 $4,234 $14,234
6.0% 180 $84 $5,189 $15,189
7.0% 180 $90 $6,179 $16,179
8.0% 180 $96 $7,202 $17,202
9.0% 180 $101 $8,257 $18,257
10.0% 180 $108 $9,343 $19,343
11.0% 180 $114 $10,459 $20,459
12.0% 180 $120 $11,603 $21,603
Smart Borrowing
Why be a cosigner?
There are two major factors to consider here. First,
acting as a cosigner allows you to take an active
role in funding the education of a loved one. It’s
a noble cause, and the long-term value comes
from seeing a person successfully morph from
a high school graduate to a working, college-
educated professional.
The second factor is more practical, but no less
important. Most high school grads and college
students simply don’t have an established
credit history. They haven’t had time to build a
successful repayment history with various lenders
like credit card companies or mortgage lenders.
As a result, they’re unable to borrow alone. Most
lenders will require that a second person – a
person with an established credit history – to
cosign on the loan.
What are the benefits?
For most borrowers, the single biggest benefit
to getting a cosigner is that it increases the
borrower’s chances of being approved for a
student loan. With most modern students unable
to pay for higher education without borrowing,
cosigners open up possibilities to students who
would otherwise be unable to attend college (or
at least the college of their choice). The second
benefit is that putting a cosigner on the loan may
lead to a better interest rate if rates are based
on credit score and the cosigner’s score is higher
than the primary borrower’s score.
In addition, a cosigner provides a substantial
barrier to late payments or default.
What are a cosigner’s responsibilities?
Cosigning will require a credit check. May
require submitting other documents, such
as proof of income and/or savings, but the
most important responsibilities come much
later, during repayment. Just as a borrower is
responsible for on-time monthly payments until
the loan is satisfied, a cosigner shares that same
responsibility.
Student loan debt is a long-term commitment,
with repayment periods that can extend for many
years. Throughout the course of that repayment,
the cosigner will be responsible for repayment
just as the borrower is. That means that if the
borrower fails to meet the terms of repayment
and the cosigner doesn’t do their part to chip in,
both parties will be penalized.
Some loans will allow the servicer to release the
cosigner after certain conditions have been met.
Make sure to ask your servicer about this option,
if it is available, and be very careful to follow the
guidelines.
Student loans cannot be discharged through
bankruptcy, unless it can be proven that the
student loan creates an “undue hardship”.
It’s important to ask your lender about other
contingencies as well, so that you can be clear
on the terms of your loan. What happens if the
borrower becomes ill or is unable to work? Will
the loan be discharged if the borrower dies? How
long will it take to alert the cosigner that there is a
problem if the borrower misses a payment or is in
danger of default?
Knowing your responsibilities as a cosigner is an
important first step towards helping your loved
one cover the cost of school. Armed with the right
info, you can feel confident that you’re helping to
make a difference, and that you’re making the
commitment with a clear understanding of what
it entails!
Cosigning for a Student Loan
Your Credit and Credit Score
The credit score is a model developed to help lenders
assess your ability to pay back a loan. If you are
regularly late on payments, have any collection
accounts, have filed bankruptcy, or you have a
judgment or lien against you, your credit score is likely
to have taken a hit. However, even just having too
much debt can affect your score. If you strongly believe
your credit score should be higher than it is, check out
your credit reports to make sure there aren’t any errors
or accounts you know you didn’t open.
If your credit score is just a hair away from meeting
the lender’s criteria, some simple changes could affect
your approval. For example, part of your credit score
is determined based on the number of open accounts
you currently have. By ensuring that previously closed
accounts are no longer included, check the accurcy
of your credit report. Removing previously closed
accounts might be all you need to do to give your FICO
score a little boost.
Your Income
Most lenders want to see that you are earning enough
to pay back the debt you are taking on. Before applying
for a loan, you may want to ask the lender if they
have a threshold for income in order to qualify for
the loan. If they are willing to share this information, it
could save you from applying for a loan you won’t be
eligible for. Keep in mind, the lender may look at the
student income, the cosigner income, or both. Adding a
cosigner to the loan typically helps students qualify for
loans they otherwise would be denied for and can also
help students secure a better rate. Typically, a lender is
going to want documentation to back up the income
you made, so be prepared to send it in, if asked.
Debt-To-Income (DTI)
Your lender may take a look at your debt-to-income
ratio or free cash flow to determine your eligibility.
Even if the lender doesn’t have a minimum income
requirement, your income can be very important in
helping you qualify for a loan based on how much debt
you have.
Your debt-to-income ratio takes into account how
much you have to pay each month towards your debt
(mortgages, loans, credit cards, etc) vs. how much
money you are taking in each month. A higher debt-to-
income ratio is less desirable because it could indicate
you may have trouble making your monthly payments
should something go wrong. What’s a high debt-to-
income threshold? Lenders all differ, but if your DTI ratio
is in the 40% range, you may be at risk for denial.
If you are at the end of an installment loan, such as a
car loan, and you want to reduce your debt-to-income
ratio, pay it off a month or two before you apply for
your student loans which could significantly reduce
your debt-to-income calculation.
Your Assets
The lender may request documentation to prove you
have savings or assets to help you repay the loan
should you lose your job or find yourself unable to work
for some other reason. If you don’t have any savings or
your income is too low, you are less likely to be able to
repay your debt. Create an account with a few months
worth of transferable savings to prove you have the
funds you need to pay if things don’t go as planned.
If you are denied on your student loan, know that all
is not lost. There is no credit criteria on Federal Direct
Subsidized and Unsubsidized loans, so make sure
you have exhausted the annual limits on those first.
If you are denied on a Federal PLUS Loan, your
student may be able to get additional Federal Direct
student loan funds. You may also have the option
of adding an “endorser” on your loan to help you
qualify.
If you are denied on a private or state-based
student loan, call the lender and ask why. It may be
something as simple as an address mismatch or
you entered the wrong social security number or
had a typo for your stated income.
A quick phone call may solve your problem.
However, if the issue is your credit score, financial
history, or some other factor, there may be some
steps you can take. Below, we have included some
common reasons for student loan denial and how to
handle them.
If you were denied and you have taken the steps
above, remember there may be nothing you can do
to change the lender’s decision. You’ll likely have to
find another way of paying for college.
Getting Denied for a Loan
11
What are Entrance and Exit Interviews?
If a student has federal student loans, he or she
will be required by law to complete an entrance
interview prior to receiving a loan and an exit
interview before graduation. Entrance interviews
help students understand their federal student
loan responsibilities. Exit interviews are used to
inform students about repayment obligations
and options.
What is a grace period?
After graduation, students may be entitled to
a grace period, or a period during which they
aren’t required to make student loan payments,
typically for six months. Although a grace period
applies to all federal loans, not all non-federal
loans afford this option so make sure to check
with the lender to determine when payments will
be due on each of your family member’s loans.
Making payments towards student loans during
the grace period (and also during any deferment
periods) can be a good idea. It can reduce the
amount of interest that is added to your balance
and ultimately paid over the life of the loan.
What is deferment and forbearance?
Your lender may grant you a temporary
postponement of payments called a deferment
or forbearance. Whether you receive a
deferment or forbearance depends on your
eligibility and the type of loan you have. Many,
but not all, student loans come with in school
deferment. Be careful to understand if you will be
expected to make payments while in school on
any non-federal loans you borrow.
Federal loans typically offer more deferment and
forbearance options than non-federal education
loans. If the student re-enrolls in school at least
half time, you are unemployed, in the military
or performing another public service, or having
trouble making your student loan payments
for any other reason, you will want to contact
your lender or student loan servicer to see if you
qualify for a deferment or forbearance.
What happens if I default on my student loan?
Defaulting on your student loan has many
serious consequences. If you are having
trouble making payments, remember to call
your student loan servicer to learn about any
alternative loan repayment options available to
you, such as forbearance. If you default on an
education loan, you may:
• Be ineligible for federal and private student
aid in the future.
• Lose your deferment and forbearance
options.
• Be required to pay entire loan balance
immediately.
• Incur additional costs if account goes to
collection.
• Damage your credit and ability to borrow in
the future, rent an apartment, or even get a
job.
• Have your federal or state tax return withheld
or be applied to your defaulted loan balance.
• Have your wages garnished in order to pay
your student loan bill.
Student Loan FAQ
Rhode Island Student Loan Authority
935 Jefferson Blvd., Suite 3000
Warwick, RI 02886-2225
Toll-free: 800-758-7562 | Local: 401-468-1700
risla.com
7/01/24
