Juno's Undergraduate Student Loan Guide
Here's what you need to know about the process.
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Top Nine Most Popular Questions
1. When do I start?
Usually a month before the tuition billing due date. If the student is starting in the fall, July is a common month to apply.
2. How long does it take?
Usually a few weeks from start to finish. You can usually get initial quotes pretty quickly (within a few days) and decide what to do from there.
3. Where does the money go?
The lender sends the loan to the school. If you are taking out funds to cover living expenses (like an apartment), the school will send anything beyond their costs to the student.
4. What do most parents do in terms of loans?
They hit the Federal Direct cap first. Depends on the student but starts at $5,500. Then if they need more they decide between federal Parent PLUS and private student loans. For those with good credit scores, private loans tend to be cheaper.
5. What kind of loan do they take out?
The most common are fixed interest 10 year loans. Many parents don't want to pay anything while in school (deferred) but the smarter strategy is often to pay a little while in school to get a lower interest rate. If you pay $25 every month for example it can result in significant savings, especially when you use the autopay discount.
6. Can I pay off the loan early?
Yes. There are no penalties or fees associated with this.
7. Are there any other fees?
8. Does it matter if my student doesn't have a credit score?
Usually the student's credit score doesn't matter if the parent is cosigning (the most common situation).
9. How much can I take out?
Up to the school's stated cost of attendance minus any financial aid received.
- Direct Subsidized Loan (aka Stafford Loans): For eligible undergraduates who demonstrate financial need. Usually the cheapest option available for undergraduate students. The interest you owe doesn’t begin accruing until 6 months after graduation, which is also how long you have before you need to start paying back the loan (known as the grace period).
- Direct Unsubsidized Loan (aka Stafford Loans): For eligible undergraduates and graduate students but eligibility is not based on financial need. You also have a 6 month grace period but interest begins accruing immediately after these loans are disbursed.
- Direct PLUS Loan: For grad students, professional students, and parents of dependent undergrads. Eligibility is not based on financial need, but a credit check is required. Interest rates may be higher on these loans, but you are able to borrow the entire cost of attendance.
Here’s a side-by-side comparison:
- Fixed-Rate: As the example above shows, a fixed rate will stay the same throughout the entire life of your loan.
- Variable Rate: A variable rate is when an interest rate fluctuates through the repayment process. These interest rates rise and fall with something called LIBOR, which “serves as a globally accepted key benchmark interest rate that indicates borrowing costs between banks.”
- Auto-pay discounts: typically a 0.25% rate reduction offered if you connect your bank account to your loan servicer
- Relationship discounts: Some banks will offer up to a 0.5% rate discount if you open a bank account in addition to taking out a loan
- Member discounts: Juno negotiates exclusive rate discounts. This year, as a Juno member, you will get lower rates on your private loans than if you went directly to the lender yourself
- Origination Fee: A fee charged by a lender when you first take out a loan. The federal government is charging a 4.228% origination fee for Parent PLUS loans this year. Juno’s partner for undergraduate families has no origination fee. That might mean the difference between several thousand dollars depending on the amount you borrow.
- Prepayment Penalty: A fee if you pay back your loan ahead of the predetermined schedule. When you graduate, you become a lower credit risk and may be able to refinance your loans at a lower cost. Make sure your loan has no prepayment penalty, so you can refinance with ease. Very few lenders use this. Avoid it whenever possible.
- Application Fee: There are pretty rare. Federal loan applications don’t have application fees, and most private lenders don’t either. If you come across a private lender with an application fee, it’s a red flag, so look closely at your loan terms.
- Tuition + Mandatory fees for course materials
- Room & Board
- Health Insurance
- Personal Expenses
- Be selective about asking. Make sure you really want to go to that program.
- It usually helps if you’ve gotten into more than one school and can credibly tell one school that you’d choose it if you had more aid.
- You’ve already been accepted. They won’t change their minds because you ask for some help politely. So make sure to ask.
Refinancing: The Low Down
It’s important to keep in mind what your career plans are and how those may affect your federal loans. If you are going into public service, you may want to keep your federal loans so that you may qualify for Public Service Loan Forgiveness. As we have mentioned already, there is also a federal student loan holiday in effect for federally-held student loans. Federal loans will have 0% interest accruing and no payment collections until September 30th, 2021. Refinancing these loans may not be in your best interest. If you have private loans, taking advantage of lower interest rates is a great way to save money on the loans you’re already paying for. If and when the federal loan holiday expires and you figure out your PSLF eligibility, there can be some serious perks to refinancing a federal loan into a private loan if your federal loan has a high interest rate.
Juno came into existence to help students save money on student loans and other financial products through group buying power by negotiating with lenders. The Juno Team has worked with 90,000+ students and families to help them save money.
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