IMPORTANT – If you’re a spring 2023 Vermont college grad who is staying in state and working for a Vermont-based company, you could be eligible for $5000 in loan repayment! CLICK HERE.
Upcoming Events
8:45am - 3:45pm daily through August 4 at VSAC, Winooski
Are you a 7-12th grade math teacher in Vermont? You are invited to a week of professional development, July 31 – August 4, to introduce you to a new course...
What You Need to Know About Student Loans
Welcome to Loans 101, the basics on education loans and what you need to know to borrow wisely. If you’re new to the world of education loans, the details can be confusing. As Vermont's non-profit state agency for higher education, we want to help you understand and think smart about loans so you can confidently make the right choices now and manage your education debt successfully down the road.
Why you should use federal student loans first
The U.S. Department of Education offers loans to families for undergraduate education. These typically appear on your financial aid offer.
For students:
Federal Direct loans are for students enrolled in college or a training program at least half-time. There are two types:
- Subsidized (based on financial need)
- Unsubsidized (not based on financial need)
For parents:
Federal Direct PLUS parent loans are for up to the full remaining cost of attendance. PLUS loans are available through your school.
Learn more at studentaid.gov/loans.
These loans, often called alternative loans or private loans, go by all sorts of brand names, depending on the lender. Available through:
- VSAC and other nonprofit state agencies
- your college
- commercial lenders (banks, credit unions)
For students & parents:
Families can use these loan types to cover costs that remain after students borrow federal Direct loans.
Non-federal loans are NOT created equal—each lender sets its own terms, and they have different benefits, interest rates, and repayment options than federal loans.
Federal student loans (in the student’s name) from the U.S. Department of Education are considered the best place for students to start. These loans offer benefits like flexible repayment options (for example, making monthly payments based on your income or deferring payments during periods of hardship).
The financial aid office at each school will determine whether you’re eligible for federal loans, based on the information you reported on your Free Application for Federal Student Aid (FAFSA).
VSAC recommends that you accept the maximum in federal student loans—Direct Subsidized first
(if offered), then Direct Unsubsidized—before considering any other types of loans.
| First year (up to $3,500 may be in subsidized loans) |
$5,500 |
| Second year (up to $4,500 may be in subsidized loans) |
$6,500 |
| Remaining years (up to $5,500 may be in subsidized loans) |
$7,500 |
|
Cumulative |
$31,000 |
Sub or Unsub?
Federal Direct Subsidized loans, for students with greater financial need, do not accrue interest while a student is in school or in a deferment period. Your school will determine whether you’re eligible.
Federal Direct Unsubsidized loans, available for all students regardless of financial need, start accruing interest when the loan is disbursed (while you’re still in school).