4. Institutional Requirements Related to Education Loans
In accordance with 34 CFR 668.14(b)(29)(ii), an institution must, upon the request of the applicant, discuss the availability of Federal, State, and institutional financial aid. Students and parents may qualify for loans or other assistance under Title IV of the Higher Education Act (HEA) programs. The terms and conditions of Title IV HEA program loans may be more favorable than the provisions of private educational loans.
The Higher Education Opportunity Act of 2008 (Pub. L. 110-35) (HEOA) and the added section 128(e)(3) to the Truth in Lending Act (TILA) to require that before a private educational lender may consummate a private education loan for a student in attendance at an institution of higher education, the private education lender must obtain the completed and signed Self-Certification Form from the applicant. The Federal Reserve Board’s Final Regulations published on August 14, 2009 incorporate this new requirement at 12 CFR 226.48(e). Many private loan lenders will provide the Self-Certification Form to the student borrower. Required information regarding Private Education Loans will be provided to prospective borrowers via the KCTCS and College Financial Aid Office websites.
The 16 KCTCS colleges do not use Preferred Lender Lists, Lender Arrangement Disclosures, Lender Arrangement Annual Reports, Marketing of Private Loans, or Codes of Conduct.
A Private Education Loan (also referred to as an Alternative Student Loan) is not a federal student loan, but one through a private bank or other lending institution. Generally, Private Education Loans have interest rates, repayment terms, and deferment options that are substantially less favorable than those of the Direct Stafford and Parent PLUS Loan programs. Prospective borrowers will retrieve and complete the required Private Education Loan Applicant Self-Certification Form from the KCTCS and individual college websites. Instructions for completion accompany the form.
The Federal Stafford Loan program consists of two types of loans, subsidized and unsubsidized. Eligibility for both is evaluated based on a complete current year FAFSA and school information. Students may receive both types of Stafford Loans, but are subject to annual and aggregate limits. This program provides financial assistance to expand higher education opportunities for undergraduate, graduate, and professional students attending postsecondary schools on at least a half-time basis.
A subsidized Stafford Loan is awarded on the basis of federal financial need. No interest is charged to the borrower before repayment begins or during authorized periods of deferment. The Unsubsidized Stafford loan accrues interest from the time of the first disbursement.
Borrowers are not required to pay this monthly interest on the Unsubsidized Stafford Loan while attending at least half-time in a degree program. However, unpaid interest on the Unsubsidized Stafford Loan is capitalized by the lender onto the principal of the loan.
Prospective borrowers for these programs can find application, disclosure information, and step-by-step instructions on the KCTCS and individual college websites.