Know Before You Owe
Those who qualify for need-based aid may borrow a subsidized Stafford Loan, and students who do not qualify may borrow an unsubsidized loan. Stafford loans are entirely in the student's name.
Subsidized
- Who Can Borrow: Students who demonstrate financial need as determined by the FAFSA.
- Lender: Department of Education.
- Loan Amount: Up to $3,500 for the freshman year, $4,500 for the sophomore year.
- Interest Rate: 4.99% for 2022-23. The federal government pays interest while the student is enrolled at least half-time.
- Fees: A 1.057% origination fee will be deducted from each loan disbursement for loans where the first disbursement is made on or after October 1, 2020 and before October 1, 2023.
- Repayment Terms: Repayment begins six months after graduation or after the borrower ceases to be enrolled at least half-time. Each year while the borrower is in repayment, he or she is required to pay at least $600 or the unpaid balance (whichever is less). The borrower has up to 10 years to repay the loan. There is no penalty for early repayment. To assist with planning, the Department of Education provides very helpful budget and repayment calculators.
- Application Instructions: Complete an online entrance interview and complete a Master Promissory Note (MPN) at www.studentloans.gov.
Unsubsidized
- Who Can Borrow: Students who do not qualify for the need-based subsidized Stafford Loan, or those who only have partial need-based Stafford eligibility.
- Lender: Department of Education.
- Loan Amount: Up to $5,500 for the freshman year, $6,500 for the sophomore year.
- Interest Rate: 4.99% for 2022-23. Interest accrues while the student is in school and during loan deferment; the student doesn't need to pay the interest at this time, but the accumulated interest will be added to the principal and increase the amount to be repaid. The student has the option of making interest payments while in school. (Students can indicate this on their MPN. Payments will be made to the loan servicer). 2023-2024 interest rates will be announced in June.
- Fees: A 1.057% origination fee will be deducted from each loan disbursement for loans where the first disbursement is made on or after October 1, 2020 and before October 1, 2023
- Repayment Terms: Repayment begins six months after graduation or after the borrower ceases to be enrolled at least half-time. Each year while the borrower is in repayment, they are required to pay at least $600 or the unpaid balance (whichever is less). The borrower has up to 10 years to repay the loan. There is no penalty for early repayment. To assist with planning, the Department of Education provides very helpful budget and repayment calculators. 2023-2034 interest rates will be announced in June.
- Application Instructions: Complete an online entrance interview and complete a Master Promissory Note (MPN).
- To view current interest rates.
Interest and Capitalization
If you are borrowing a student loan, it is important to have a basic understanding of how interest accumulates, as well as the concept of interest capitalization.
The initial principal is the total amount you borrowed. Unless the loan is subsidized, interest is likely accumulating on that loan immediately when the loan disburses. At certain points, the unpaid loan interest may be capitalized, which means it will be added to the principal; your accumulated interest will begin to accrue interest. Capitalization usually happens at pre-appointed times, such as when your loan enters repayment . The larger the principal, the higher amount of interest will accrue.
For loans that are not subsidized, you may choose to pay the interest while you are still enrolled, which can help you to avoid capitalization later and can save you money in the long run. Let's look at the difference between paying the interest while in school versus allowing the interest to accumulate.
The first step is to determine the interest that is accruing on your loan while you are in school. Use the following calculation:
Loan principal times interest rate divided by 365 = daily interest rate.
Next, calculate the total interest by the number of days the loan has been collecting interest. In this case you will calculate from the time of disbursement to the time you enter repayment.
Budgeting & Borrowing
Student loans can be a good resource to help finance your college education. Earning a degree is an investment in your future, and responsible borrowing can help you cover your costs, reach your goals, and get a jump start on building strong credit for after college. The information and guidelines below are intended to help you consider your
Borrowing Wisely
You may find that you are eligible to borrow more than you actually need through federal student loans. It might help to plan a budget to determine how much you need to borrow, so you can reduce the amount you will ultimately have to pay back. Plan a budget and complete a budgeting worksheet to review all of your expenses and resources.
Know What You’ll Owe
Federal loans have a number of repayment options, including income-driven plans that base your payment due on a set percentage of your income. You can also use student loan calculators to figure out how much you might owe after leaving Northwestern.
You Can Make Early Payments
If you are able to make even small payments while you are still in school, over the summers, or during your grace period, you can reduce the amount you will owe in interest long-term or even pay your loans off before you graduate.
Talk to a Financial Aid Counselor
The financial aid office can help you review your costs and aid, help you work out a budget of how much you might actually need to borrow, and go over any questions you might have about loan options and repayment.
Credit Cards vs. Student Loans
Some students may be nervous about borrowing student loans for the first time and may look to credit cards as an alternative to help with personal and educational expenses while they are in college. Since both options are a form of borrowing, it is important to understand how each work in order to make the best financial decision for yourself. Below is a comparison chart between credit cards and student loans:
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Credit Cards |
Federal Student Loans |
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Interest Rates
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Credit cards typically carry higher interest rates than student loans and can often exceed 20%. |
Federal student loan interest usually falls below 10%. Some students may qualify for federal subsidized loans, where the loan is interest-free while the student is in school. |
National Student Loan Data System (NSLDS)
The National Student Loan Data System (NSLDS) is the U.S. Department of Education’s centralized database of all federal student aid. This system provides you with an overview of your federal student loans, your loan amounts, enrollment status, outstanding balances, loan status and disbursements.
You can access your information online at www.nslds.ed.gov. You will need to log in with your Federal Student Aid (FSA) ID.
NSLDS also provides information about your loan servicer. The loan servicer is a company that collects payments, responds to customer service inquiries, and performs other administrative tasks associated with maintaining a federal student loan. Your lender contact information is available through NSLDS, but we also have provided a servicer list for your reference as well.
A great feature of NSLDS is that you can download your loan information for your records by selecting the “MyStudentData Download” button.
While NSLDS does provide information on educational debt, it is important to note that it only provides information regarding the federal student loan programs. For information on private loans you will need to contact the lender directly. If you are unsure of your private lenders, you can contact your financial aid office or refer to your credit report.
