It’s the American dream. You work hard at school, get good grades and achieve your best possible SAT score. And in the presence of your delighted friends and family you graduate from high school with big dreams and high hopes of a graduate degree and your dream job. Except, that if you are like the majority of American college students, that dream comes at a price… and the interest rates could drown you.
According to the US Student debt project (http://www.guardian.co.uk/money/2013/apr/03/student-loan-debt-america-by-the-numbers) there are currently in excess of 37 million student loan borrowers in the US today.
The Minnesota Office of Higher education is a state agency providing students with financial aid programs and information on assisting them with gaining access to postsecondary education. The Student education loan fund program (SELF) is a long-term, low-interest educational loan available exclusively from the Minnesota office of higher education who is the only lender.
This loan program is distinct to the state of Minnesota, so either you need to be a resident of the state or a non-resident applying to a school in the state.
So, in an effort to cut to the chase and give you a quick review of the Minnesota Office of higher education student loan, here is …… the Good, the Bad and the Ugly:
- Loans are available from $500-$10,000 per year for undergraduates pursuing a bachelor’s degree and graduate students; or $500-$7,500 per year for students in programs which are less than four years.
- There are no fees required.
- There are two interest rates available. The SELF V loan, which is a fixed rate at 7.5% and will not change over the life of the loan and the variable rate SELF V loan . This rate is not tied to any credit scoring and all students are charged the same interest rate. This variable rate changes each quarter based on the average three month London Interbank offered rates (LIBOR). So regardless of whether I maxed my credit card on a shopping spree in New York or not, I am entitled to the same rate as the next, non-shopaholic guy (or girl, as the case may be).
- Minnesota participates in a large number of college loan forgiveness programs. Certain health and service professions are eligible. Some are strictly state programs, while others are federal student loan forgiveness programs.
- There are no penalties for settling your debt early.
- Before applying for a SELF Loan, students are required to investigate other sources of federal, state, institutional, and private aid for which they may be eligible.
- SELF Loans cannot be included in a federal loan consolidation.
- A creditworthy co-signer is a prerequisite of the loan application.
- Unlike other private loans there is no grace period or deferment options, which means that should life throw you a curve ball, you (and / or your co-signer) had better have a good back-up plan.
- Like any loan, you’ll need to pay it back ( I warned you it was ugly) and consistently service your debt if you hope to keep a handle on it. Quarterly payments of interest are required even while completing your studies and monthly payments will need to be made after leaving school.
- The loan must enter repayment no later than nine years from the disbursement date. When you finish your study, unless you are already in a required repayment period, you have two repayment options:
- The Standard Plan requires monthly payment of interest for one year after you leave school and then monthly payments of principal and interest until the loan is paid in full.
- The Extended Interest Plan provides two more years of monthly interest only before starting principal repayment.
- The maximum repayment period is determined by the total debt owing:
- For loans less than $20,000, repayment terms cannot exceed 10 years from when you leave school.
- If the balances are between $20,000 to $40,000, the repayment term on the SELF V Loans shall not exceed 15 years from when you leave school.
- For balances of $40,000 and greater, the repayment term on the SELF V Loans shall not exceed 20 years from when you leave school.