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Federal Loans

Federal student loans, some of which carry low or subsidized rates of interest, are an important part of the Law School's financial aid program. All students interested in financial aid must apply for these federal loans using the Free Application for Federal Student Aid (FAFSA), available at www.fafsa.ed.gov.

The Financial Aid Office will determine your eligibility for federal loans. You will then need to apply for the loans, which are available from a wide array of commercial and independent lenders, including Yale University and Access Group. Students who receive Perkins loans as part of their financial aid package must complete a Perkins Loan Application.

The basic federal loan programs are:

Subsidized Federal Stafford Loans
Unsubsidized Federal Stafford Loans
Sources of Stafford Loans
Federal Perkins Loan
Federal Grad PLUS Loans

Subsidized Federal Stafford Loans
Subsidized Federal Stafford loans are loans that do not accrue interest during the time that the student is in school (the interest is “subsidized” by the federal government). These loans are available to U.S. citizens and permanent residents on the basis of need.

Need-based eligibility for these loans is determined from information contained in the FAFSA.

Subsidized Stafford loans are available in the maximum amount of $8,500 per year, with a cumulative maximum of $65,500 (including the unpaid balance of any undergraduate subsidized loans).

Grace period and interest rates: Although the grace period and interest rate of any prior Stafford loans will remain in effect for those loans, any new disbursements will carry a six-month grace period and an annual variable rate of interest. The 2006-07 Fixed Interest rate is 6.8 percent.

Deferments: After graduation, loan repayment can be deferred for a variety of reasons, including further study, unemployment and economic hardship. First-time borrowers will be subject to all terms and deferments that are in effect at the time their loans are disbursed. For borrowers who have any outstanding balance on a prior loan(s), the deferments that were stipulated in their original promissory note(s) will pertain to any new disbursements as well.

Fees: An origination fee equal to 3 percent of the loan principal and an insurance premium (which varies among lenders with a legal maximum of 1 percent) may be deducted from the loan check(s).

Unsubsidized Federal Stafford Loan
Unsubsidized Federal Stafford loans are loans that do accrue interest while the student is in school, but often at a lower rate than other types of loans. Students who qualify for subsidized Stafford loans may also take additional unsubsidized Stafford loans. Students who fail to meet the federal needs test in order to qualify for all or part of the subsidized Stafford loan are also eligible to undertake unsubsidized Stafford loans.

The annual maximum unsubsidized Stafford loan is $20,500, less any amount of subsidized Stafford loans for which the borrower is eligible. The cumulative maximum is $138,500, less any subsidized Stafford loans and less the remaining balance of any undergraduate Stafford loans. The terms of the unsubsidized Stafford loans are identical to the subsidized Stafford loans with the following two exceptions:

There is no needs test for unsubsidized Stafford loans. Graduate and professional students may borrow up to $20,500 per year, less any amount of subsidized Stafford loans for which they may be eligible, except that the combined subsidized Stafford loans and unsubsidized Stafford loans may not exceed the difference between the cost of attendance and all other financial aid (including other loans received for that period of enrollment).

There is no interest subsidy. This means that the borrower is responsible for the interest which accrues while (s)he is enrolled in school, either by making regular monthly or quarterly payments, or by capitalizing the interest. "Capitalization," which must be negotiated with the lender, means that all of the interest that accrues during the in-school period is added to the principal and payments are based upon the new (larger) capitalized principal.

All other subsidized and unsubsidized Stafford loan terms are identical: six-month grace period, various repayment options, standard deferments and an annual fixed interest rate of 6.8 percent.

Sources of Stafford Loans
Students who have previously undertaken Stafford loans from a participating bank, savings institution or credit union ordinarily continue to borrow from their original lenders in order to make repayment easier. Students who are borrowing for the first time, who can no longer borrow from their previous lender (e.g., because of a change of residence), or who have questions about the particular provisions offered by their lender should consult the Financial Aid Office regarding alternate loan sources. Students should be alert to the fact that loan fees and repayment terms may vary among lenders.

Federal Perkins Loan 
Perkins loans are low-interest, subsidized loans, offered to U.S. citizens and permanent residents with exceptional need. (Exceptional need is defined as students receiving Yale need-based scholarship grants.) Students may borrow a maximum of $6,000 annually, with a cumulative maximum of $40,000 for undergraduate and professional or graduate studies combined. Students who are in default on a previous student loan of any kind or owe a refund on any Title IV grant are not eligible.

Grace period and interest rates: The grace period for Perkins loans is nine months. The interest rate on the Federal Perkins Loan is five percent. Because the loan is subsidized, interest does not accrue while the student is in school or during authorized deferment periods.

Students must complete the required online Entrance and Exit Interviews and complete the necessary online Master Promissory Note and Disclosure Statement before Perkins loans will be disbursed. Instructions will be sent during the summer from Student Financial Services.

Federal Grad PLUS Loans
Credit-worthy students may borrow up to the cost of attendance less any financial aid (grants/loans). The interest rate will be fixed at 8.5%. Interest will accrue on the loan following disbursement but repayment does not begin until after graduation. One-half of the loan is disbursed in the fall and the second half in the spring semester. Since this is a federal loan, it may be consolidated with other federal loans after graduation.