Loans

Colby no longer expects its students to borrow to pay College costs and has discontinued assigning loans to the aid packages of students who need financial assistance as determined by the College. Students may still elect to borrow, depending upon personal and family circumstances, but their election to assume loans will be entirely their option. A number of loan choices remain available, including the Perkins and Stafford programs and a variety of parent loan programs.

Federal Perkins Loans
Federal Perkins Loans are made available to Colby students through federal and College funding and in accordance with federal regulations.

Repayment of these loans does not begin until nine months after a student has left college. The annual interest rate is 5 percent. An incoming Colby student may be eligible for a Federal Perkins Loan of up to $4,000. A student automatically applies for a Federal Perkins Loan by completing a Free Application for Federal Student Aid (FAFSA). Priority is given to those students who also file a complete application for Colby aid.

Federal Stafford Loans
The Federal Stafford Loan program permits students to borrow up to:

$3,500 in the first year

$4,500 in the sophomore year

$5,500 in the junior and senior years The variable rate is no more than 8.25 percent interest.

These loans require no principal payments while the student is enrolled at least half time if the student qualifies for the federal interest subsidy. The repayment period may be as long as 10 to 25 years, and payment may be deferred for full-time enrollment in graduate school.

Students with family incomes of $0 to well over $150,000 may qualify for subsidized Federal Stafford Loans on the basis of an eligibility determination. Because many factors are included, there is no income-level cutoff in determining eligibility for subsidized Federal Stafford Loans.

Students who do not qualify for the full subsidized Federal Stafford Loan may apply for an unsubsidized Federal Stafford Loan. The only difference between these loans is that the student is responsible for the interest on the unsubsidized loan during the enrollment period.

Parent Loan Programs
Evaluation of the different programs requires consideration of both the amount available per year and the terms of repayment. For example:

Interest rates will differ: lower rates may reduce the amount of the monthly payment.

Some rates are fixed rather than variable: fixed rates will protect you from rising interest rates.

The length of the repayment term will vary: a longer term of repayment usually results in lower monthly payments.

Some programs permit interest-only payments during periods of enrollment. Interest-only payments enable you to keep the monthly payments as low as possible during the period of enrollment but will increase either the length of repayment or the size of the monthly payment after graduation. Some programs permit the capitalization of interest during enrollment; that is, no interest payments are required until after graduation, but the total debt will be much larger at that time.

Some programs provide the option of home equity security, which may enable you to deduct the interest on your federal income tax return. The fees you will pay for the paperwork necessary to secure the loan with home equity will vary. The Federal Taxpayer Relief Act of 1997 includes tax deductibility of some federal education loan interest payments for eligible filers.