Understanding Student Loans

Student loans are the most common form of college financial aid. For help in understanding student loans:

Read our fact sheet, Student Loans: The Big Questions and the Getting Your Money from the Right Place brochure.

Types of Student Loans

For student borrowers (no credit approval necessary for Stafford Loans):

  • Subsidized Stafford Loans (needs-based eligibility; the government pays the interest)
  • Unsubsidized Stafford Loans (non-needs-based eligibility; the student is responsible for paying the interest)
  • Graduate PLUS Loans - For graduate or professional students (who meet the credit requirements and have applied for their annual loan maximum eligibility under the Federal Subsidized and Unsubsidized Stafford Loan Program).

For parent borrowers (who meet the credit requirements):

How to apply for financial aid:

Students:
  1. Read our Financial Aid Timeline to get a good idea of what steps to do and when to do it.
  2. Complete the Free Application for Federal Student Aid (FAFSA) at www.fafsa.ed.gov. Your college will use the FAFSA to determine your eligibility for aid.
  3. More information on Understanding the FAFSA
  4. Then, you'll receive a financial aid award letter from your school. This will help determine your need to borrow.
  5. When you're ready to borrow, just contact your college's Financial Aid Office to begin the application process. When choosing a lender, remember, you don't need to have a prior relationship with the lender to apply for a loan.
  6. Then you'll complete the Master Promissory Note (MPN), which is your contract for the loan.
Parents:

How the money is paid

  • Loan proceeds are sent directly to your college made co-payable from the lender in at least two separate disbursements.
  • Loan proceeds will be released to you once the school has verified that you're enrolled at least half time and that your academic progress is satisfactory.

Loan Repayment

  • Subsidized and Unsubsidized Stafford Loans:
    • Repayment will begin six months after graduation or after dropping below half-time status.
    • During school, the government pays the interest on a Subsidized Stafford Loan.
    • Borrowers with Unsubsidized Stafford Loans may elect to defer all payments until six months after graduation or change in status, or elect to begin interest-only or regular payments while in school
  • Parent PLUS Loans: Repayment begins within 60 days after the funds are disbursed
  • Graduate PLUS Loans: Commerce Bank will defer repayment as long as a student is enrolled at least half time in a graduate or professional school.

Learn more about repayment, including your rights and responsibilities as a borrower.

Disclosures:

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