College loan basics in the Carolinas

Heidi Finley

Photo by UNC Charlotte

The cold, hard truth is that many students will have to take out loans to help finance their college education.

Scholarships and grants play an important role in paying for higher education – and students should vigorously seek them out – but they’re not always enough to cover the cost of attendance.

To kick off the financial aid process, students must fill our the FAFSA, the Free Application for Federal Student Aid. The information helps determine what students qualify for as far as federal grants, work study and loans.

When federal financial aid is not granted or doesn’t cover all costs, loans from other sources can fill the gap. Many states, colleges and private loan providers also require the FAFSA.

North Carolina’s College Foundation, Inc., advises students not to over-borrow, regardless of which type of loans are acquired. Loans must be repaid.

Federal loans

The William D. Ford Federal Direct Loan Program is the largest federal student loan program, according to The U.S. Department of Education serves as the lender for four types of loans:

Direct Subsidized Loans, which are for eligible undergraduate students with financial need. The school determines the amount a student can borrow, and the Education Department pays the interest while the student attends school at least half-time, for the first six months after leaving school and during payment deferment.

Direct Unsubsidized Loans are loans made to eligible undergraduate, graduate and professional students without regard to need. Unlike subsidized loans, the borrower is responsible for paying the interest during school and grace periods.

Direct PLUS Loans are loans made to graduate or professional students and parents of dependent undergraduate students.

Direct Consolidation Loans combine all eligible federal student loans into a single loan.

A fifth program, the Federal Perkins Loan, provides loans for undergraduates and graduate students with exceptional financial need in which the school is lender.

Applications, along with more information about the FAFSA federal student aid can be found here.

North Carolina

In North Carolina, the College Foundation offers the NC Student Assist Loan and the NC Parent Assist Loan. State residents attending any eligible, nonprofit institution in the country can apply, as well as nonresident students who are attending an eligible institution in North Carolina.

The loans – which are considered private, or alternative, loans – have fixed interest rates and feature a 0.25 percent interest rate reduction for auto-drafted payments.

The minimum loan amount is $1,000. The maximum loan amount differs: It is calculated based on a student’s cost of attendance minus other financial aid. Students who don’t meet credit requirements will need a cosigner who does, according to

More information and applications can be found here.

South Carolina 

In South Carolina, the state offers the Palmetto Assistance Loan. Borrowers must be South Carolina residents attending any eligible school in the country or out-of-state residents attending an eligible South Carolina School.

The minimum loan amount is $2,000, but students can borrow up to the cost of attendance, minus other financial aid. The maximum total debt allowed is $150,000 for borrowers and cosigners, including previous PAL loans.

All borrowers under age 24 are required to have a “creditworthy cosigner,” according to, but loans can be taken in the student’s name or parent’s name.

PAL loans have a fixed interest rate. Students who sign up for automatic bank draft can reduce their  interest rates by 0.25 percent.

More information and applications can be found here.


Finley is the editor of Carolina College Bound. Send questions or suggestions to

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