Student Loans

  • Private vs Federal Loans

Your financial aid scholarships and grants may not cover the cost of attending school. If you cannot afford to pay the difference out of pocket, loans may be your best option for affording school. School loans generally fall into two categories: private or federal. UC Santa Cruz also offers institutional loans, which are a type of private loans. 

Federal loans are loans created by the government. These loans usually have a low fixed interest rate. Federal loans include Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans. 

    • Direct Subsidized Loans are loans that do not gain interest while you are in school or during your six month grace period, which immediately follows your separation from the university. Interest starts accumulating during your repayment period. These loans are only offered to qualified undergraduate students with financial need. 
    • Direct Unsubsidized Loans are loans that gain interest while you are in school and during your grace period. Interest continues to accumulate during your repayment period. These loans are available to undergraduate students, graduate students, and professional students. Eligibility is not based on financial need. 
    • Direct PLUS Loans can be made to graduate students or parents of undergraduates. 

Private loans are loans offered by independent organizations. Private student loans may have a higher interest rate than federal loans, and the interest rate may be variable, meaning it can change. 

Private Student Loans 101

Institutional loans are private loans offered by a university that have contract terms similar to federal loans. At UCSC, we offer multiple institutional loans that will be included in your financial aid package if you qualify. One example is the University Loan. This loan is given to undergraduate students with financial need. Another institutional loan we offer is the Dream Loan, which is offered to AB 540 Eligible students who complete the Dream Loan application and are determined to have financial need.


  • Getting Loans

Federal and institutional student loans will be included in your financial aid offer through UCSC. Besides filling out the FAFSA, you do not need to submit any additional application to be considered for federal student loans. 

Some institutional loans, including the Dream Loan, have steps to be taken that are separate from Federal loans. You can find this information on the Financial Aid webpage that is linked in the resources section.

If you need private loans, you can apply for loans through the company’s website. Many banks and credit unions offer student loans, and there are companies dedicated to providing student loans, SallieMae being a popular one. If you get a private student loan, the loan company will ask for UCSC’s information. They will send your money to the school directly using this information; no money will go to you unless you get a refund from UCSC. You will only receive a refund if your total payment to UCSC, including all loans, scholarships, grants, and other payments, is greater than your UCSC bill. 


  • Do I Need to Take Every Loan Offered? 

When you receive your financial aid offer it may include federal and institutional loans up to your financial need or up to the amount you are allowed to borrow, whichever is less. You do not have to accept these student loans if you do not need them. You should only take the loan amount you need to get through school. For example, let’s say you have $5000 of student loans offered to you, which in combination with the rest of your financial aid offer means you’d be getting a refund of $5000 if you accepted the loans. You plan to live with your parents for free, so you would not need the $5000 to pay for housing or other school expenses. In this case, you do not need the $5000 loan, so you do not have to accept it. Also, if you have private scholarships or your family is covering the cost of your schooling, make sure to keep that in mind when determining if you should accept the loan amounts offered to you. 


  • Repaying Loans

Unlike grants and scholarships, which don’t need to be repaid, loans need to be repaid in full. Most federal loans and private loans give you a six month grace period after you are out of college before you have to start paying them back. Some institutional loans may have similar grace periods, but that is dependent on the type of loan. The University Loan Program has a nine-month grace period. When you graduate, withdraw from school, transfer, take a leave of absence that is more than 180 days, or go to school less than half time, you trigger this grace period and the following repayment period. If any of these situations apply to you and you have federal or institutional loans, you will also need to complete loan exit counseling. Exit counseling goes over your possible repayment options and your rights and responsibilities as a borrower.

You may have multiple repayment options when you begin your repayment period. Most loans divide what you owe into even chunks you pay each month to repay the loan in 10 years. However, you may have the option to make payments based on your income or make payments that increase over time. When you make federal and institutional loan payments you will not directly pay the government or UCSC. Instead, you will pay a loan servicer. A loan servicer is a company that is hired to keep track of your loan and repayments. For private loans, you will make payments to the same company that gave you the loan. 

You may have the option to defer, or push back, repayment due to illness, economic hardship, being in the military, going back to school, or other situations. During the time your loan is deferred, or your repayment is paused, your loans will essentially be frozen. No interest will accrue on the loan during that time.

If you do not qualify for a deferral but need to pause your student loan payments, you can request a forbearance on your loans. Forbearance is like a deferral, but with a forbearance, your loan continues to accrue interest while you are not paying on it. 

Federal loans offer some forgiveness options to eligible borrowers. If you work in public service or as a teacher in a low-income school during your repayment period, you may be eligible for loan forgiveness. This loan forgiveness is typically offered after you have made 120 on-time loan payments.

You also may not have to pay back your federal loans if you declare bankruptcy or if you become totally and permanently disabled.