An education loan is a form of financial aid that must be repaid with interest. Education loans come in three major categories: federal student loans, federal parent loans, and private education loans (also called alternative student loans).
The two types of federal loans where the student is the borrower are the Federal Perkins Loan and the William D. Ford Federal Direct Loan.
The Federal Perkins Loan is a campus-based program with limited funding awarded by the Office of Financial Aid to first-year students who demonstrate high need based on the results of the FAFSA and the availability of funds. You should apply for these loans as soon as possible, as they are offered to students who apply by the preferred deadline (submit their FAFSA) by March 15. The loan has a fixed interest rate at 5.00%. The typical award amount is $1500.
Perkins Loan Process
Eligible first-year, dependent students may qualify for up to $5,500 in this low-interest student loan program. Direct loans are either subsidized or unsubsidized.
For the 2014-15 academic year, subsidized direct loans have an interest rate of 4.66% and are for students who demonstrate financial need based on the results of the FAFSA. The interest charge on these loans is deferred while the student is in school. Unsubsidized direct loans have an interest rate of 4.66% and are available to students who did not demonstrate financial need based on the results of the FAFSA. These loans accrue interest while the student is in school. We encourage students to pay interest on unsubsidized direct loans while enrolled in school, however, students are not required to begin repayment until after they leave school. To determine how much interest you will pay on an unsubsidized direct loan, use this cost of interest capitalization calculator. Payment of the principal portion of all direct loans is deferred until six months after graduation.
The Cleveland Institute of Art uses information from the FAFSA to determine eligibility for a subsidized or unsubsidized direct loan. Independent students may be eligible for additional unsubsidized loan funds through the Federal Direct Loan Program. Unless you will be attending only one semester during the academic year, we recommend you borrow the Direct Loan for an entire academic year (both fall and spring semesters). The loan will be disbursed in two equal installments, split between the fall and spring semesters.
Direct Loan Interest Rates + Fees
All direct loans have a 1.072% origination fee. This fee increase to any new loans first disburses on or after October 1, 2014 to 1.073%. The College Cost Reduction and Access Act of 2007 reduced the interest rates on subsidized direct loans for undergraduate students starting July 1, 2008.
The interest rates for subsidized direct loans are as follows:
Effective July 1, the unsubsidized loan interest rate for the 2014-15 academic year is 4.66%.
Direct Loan Application Process for First-Time Borrowers at CIA
Complete and submit all required documents for Admissions.
Complete and submit the FAFSA. CIA's code is 003982.
Once you have been accepted for admission to CIA and your information from your FAFSA has been received, the Office of Financial Aid will determine your eligibility for direct loan funds. The maximum direct loan amount that you are eligible to borrow will be included in your CIA Financial Aid Award Letter.
Accept the direct loan on the Financial Aid Award Letter by signing and returning it to the Office of Financial Aid. Your direct loan will not be processed and certified until you have returned a signed and dated copy of your award letter to the Office of Financial Aid.
Returning Students and Federal Direct Loans
If you borrowed a Federal Direct Loan at CIA last year, you must accept the loan by signing and returning a copy of your Financial Aid Award Letter. If you are required to complete verification, be sure to submit the required paperwork to complete this process on a timely basis. Loan funds will not be disbursed until all paperwork is received.
Maximum Annual Loan Limits for Direct Loans
You may receive a subsidized loan and an unsubsidized loan for the same enrollment period as long as the combination does not exceed the annual loan limit.
The table below includes maximum annual limit amounts for loans disbursed beginning July 1, 2008.
|Annual Loan Limits for Subsidized and Unsubsidized Direct Loans|
|Dependent Undergraduate Students||Independent Undergraduate Students|
|1st Year||$5,500 - No more than $3,500 may be in subsidized loans.||$9,500 - No more than $3,500 may be in subsidized loans.|
|2nd Year||$6,500 - No more than $4,500 may be in subsidized loans.||$10,500 - No more than $4,500 may be in subsidized loans.|
|3rd - 5th Year||$7,500 - No more than $5,500 may be in subsidized loans.||$12,500 - No more than $5,500 may be in subsidized loans.|
|Aggregate Loan Total: Maximum Total Debt from Stafford Loans When You Graduate||$31,000 - No more than $23,000 may be in subsidized loans.||$57,500 - No more than $ may be in subsidized loans.|
A Federal Direct Parent Loan for Undergraduate Students (PLUS) is a cost-effective solution for parents to help keep their student’s debt burden as manageable as possible. Parents of dependent children may apply for these low-interest loans. Funds from PLUS can only be used to pay college expenses, such as tuition, room and board, books and supplies, and personal expenses.
The PLUS may be borrowed up to the cost of attendance minus any other financial aid or awards the student receives. The student and parent must meet eligibility requirements including U.S. citizenship. The parent borrower must pass a check for adverse credit history. PLUS loans may be paid back either while the student is in school or deferred until six months after graduation.
The interest rate for Federal Parent PLUS Loans for the 2014-15 academic year is fixed at 7.21%, and there is a 4.288% origination fee deducted from the proceeds of the loan. The origination fee is increased to 4.292% that will be first disbursed on or after October 1, 2014.
If a PLUS loan is not approved, an additional $4,000 for freshman and sophomores and $5,000 for juniors and seniors unsubsidized Federal direct loan fund may be available to the student.
PLUS Loan Application Process
To initiate the PLUS Loan process, complete the CIA PLUS Application and submit it to the Office of Financial Aid. Data from this application will be transmitted electronically to the U.S. Department of Education where a credit check and other eligibility information will be evaluated.
If the PLUS is approved, and the parent borrower is a first-time borrower for their son or daughter attending CIA, the parent borrower must complete the Parent PLUS Master Promissory Note. The Federal PLUS MPN is designed for a parent borrower to use as a multi-year note for one dependent student. Under the PLUS MPN multi-year process, a parent borrower will, in most cases, sign a PLUS MPN only once, at the time the parent first borrows for that dependent student. The parent may obtain additional loans for that same dependent student based on that signed MPN, either during the same academic year or in subsequent years, for up to 10 years after the date the parent first signed the PLUS MPN. Also if a different parent chooses to borrow a PLUS Loan for the same dependent student, a new PLUS MPN must be completed. A separate PLUS MPN must be completed for each dependent student.
Once the Office of Financial Aid receives notification from the U.S. Department of Education that PLUS has been approved, it will be added to the student’s CIA Financial Aid Package, and a revised Financial Aid Award Letter will be sent to the student.
If the borrower has signed the MPN and completed all application requirements, the student can subtract the loan amount (minus the loan fees) from the student account billing statement. Please follow the instructions and complete the billing worksheet and paperwork included with the billing statement in order to deduct the PLUS Loan from the account balance.
A Private Education (alternative) Loan is offered by private banks to credit-worthy students or to credit-worthy students with a credit-worthy co-borrower. Students are encouraged to apply with a credit-worthy co-borrower to enhance their chances of having their loan approved and qualifying for the lowest interest rate possible. We recommend that you complete and submit the Free Application for Federal Student Aid (FAFSA) prior to applying for a private education loan. Federal Direct Loans awarded to students based on the data reported on the FAFSA have lower interest rates than the interest rates available for a private education loan.
Lenders offer both fixed and variable rate loans. The maximum a student can receive in a Private Education Loan is the difference between the cost of attendance and the total amount of financial aid a student receives. These loans can also be used to pay for a bank balance from a previous term.
Students and their co-borrower (if applicable) can compare information and apply for a Private Education (alternative) Loan through the Great Lakes Higher Education Corporation (GLHEC) FastChoice website.
The Cleveland Institute of Art does not endorse any Private Education (alternative) Loan lender. All Private Education loan applicants must complete a Private Education Loan Self-Certification Form and submit the form to the lender of choice.
Many families want to compare the Parent PLUS loan to a Private Education Student loan. To see a comparison of both types of loans, click here.
Take these simple steps to learn your options
Click here to access important financial aid forms, publications, and links for more information.
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