Welcome to the “Educational Loans” section of our Website, and join us for an overview of one topic that most college students have to consider while financing their education.  An educational loan is one of the most valuable resources for students and parents, and it has been since it was first introduced into federal legislation to the Congress of the United States in the late 1950’s, in response to the launch of  “Sputnick.”

Educational loans were developed specifically for college students and parents and are repayable at competitively low interest rates.  They are simple to apply for (via the FAFSA), are readily available, and generally offer a variety of repayment options.  The majority of loans that are based on financial need, the subsidized ones, require no repayment of principle or payment of interest while the student is in school, as long as he/she is attending at least half-time (generally six credits per term).  Unsubsidized loans require quarterly interest payments (not principle) while the student is in attendance.  The principle on both a type of loans become repayable after a grace period, generally after the student graduates or enrolls for less than six credits per term. 

For college students and parents, the two largest educational loan programs are the William D. Ford Federal Direct Student Loan Program, and the Federal Family Educational Loan Program (FFELP).  Long Island University offers loans through the Federal Direct Student Loan Program, and also offers loans through the Federal Perkins Student Loan and for pharmacy majors, the Health Professions Student Loan Programs.  The federal government guarantees all of these loans, and most are based on demonstrated financial need.

To help our students and parents become informed borrowers, we offer the following information on the educational programs.  We have provided information that we hope will explain loan borrowing from the application process through the repayment process, and hope that we can help families make the best loan choices for their student. This and additional information is also available in our publication “Financial Aid Guide” which is sent to all students with their award notices each year.

Repayment Plan Options:

When repaying Federal Direct Subsidized Loans and Federal Direct Unsubsidized Loans, student borrowers may choose from four repayment plans:

Standard Repayment Plan:

With the Standard Plan, a student will pay a fixed amount each month until the loans are paid in full.  Monthly payments will be at least $50, and the student will have up to 10 years to repay the loans.  The Standard Plan is good if the student who can handle higher monthly payments because the repayment of the loans will be much quicker.  Monthly payment under the Standard Plan may be higher than it would be under the other plans because the loans will be repaid in the shortest time.  For the same reason – the 10-year limit on repayment – the student will pay the least in interest.

Extended Repayment Plan: 

Under the Extended Plan, the student will still have minimum monthly payments of at least $50, but the student can take from 12 to 30 years to repay the loans.  The length of the repayment period will depend on the total amount the student will owe when the loans go into repayment.  This is a good plan if the student will need to make smaller monthly payments.  Because the repayment period generally will be at least 12 years, the monthly payments will be less than with the Standard Plan.  However, the student may pay more in interest because the student will be taking longer to repay the loans. 

Graduated Repayment Plan: 

With this plan, payments start out low, then increase, generally every two years.  The length of the repayment period will depend on the total amount the student owes when the loans go into repayment.  If the student expects an increase to their income steadily over time, this plan may be right for the student.  The initial monthly payments will be equal to either the interest that accumulates on the loans or half of the payment that the student would make each month using the Standard Plan, whichever is greater.  However, the monthly payments will never increase to more than 1.5 times what the student would pay with the Standard Plan.

Income Contingent Repayment (ICR) Plan:

This plan gives the student the flexibility to meet their Federal Direct Loan obligations without causing undue financial hardship.  Each year, the monthly payments will be calculated on the basis of the students Adjusted Gross Income (AGI), family size, and the total amount of the Federal Direct Student Loans.  To participate in the ICR Plan, the student must sign a form that permits the Internal Revenue Service to provide information about their income to the U.S. Department of Education.  This information will be used to recalculate the new monthly payment, adjusted annually based on the updated information.

If a student does not select a repayment plan, he/she will automatically be placed on the Standard Repayment Plan.

Examples of Debt Levels, Beginning Monthly Payments and Total Amounts Repaid for All Direct Loan Repayment Plans*