Federal Student Loans

In the US, dental school loans may be subsidized or unsubsidized and exist in the form of federal student loans and private student loans. These loans are guaranteed by the U.S. Department of Education either directly or through guarantee agencies. Subsidized loans are offered to students with a demonstrated financial need. With this type of loan, the federal government pays the interest on the loan, while the student is in college. For example, if a dental student borrows $10,000 during college, they will owe $10,000 upon graduation.

Unsubsidized federal student loans, while guaranteed by the U.S. Government, do not have the interest paying advantage like that of subsidized loans. With these loans, the interest is not paid by the government, but accrues during college. If a dental student borrows $10,000 during college, they will owe $10,000 plus any accrued interest upon graduation. For example, if you borrow $10,000 and had $2,500 accrue in interest, at the time of graduation, you will owe $12,500. In order to avoid paying accrued interest, a dental student can pay the interest while in school.

In extreme circumstances, such as death or permanent disability, some federal student loans can be canceled. Some loans may also qualify for a reduction, as long as it is not in default. For instance, if you serve in certain specialties of the Armed Forces, the U.S. Department of Defense may, as an enlistment incentive, repay a portion of the federal student loan.

Federal Student Loans

The U.S. Department of Education administers the William D. Ford Federal Direct Loan (Direct Loan) and the Federal Family Education Loan (FFEL) loan programs. Both of these programs consist of the Stafford federal student loan. Most dental schools generally participate in either one or both programs.

Federal Direct Loans

Federal Direct Loans, also known as Direct Loans or FDLP loans are distributed through a channel that begins with the U.S. Treasury Department. From there, it passes through the U.S. Department of Education, then to the dental school, then to the student. If you qualify for the Direct Stafford Loan, the federal government, through the U.S. Department of Education, is considered your lender. Loans can be made directly to a student or his/her parents. If made directly to the student, the loan does not have to be paid back until the student graduates or their enrollment status drops below half time status. When the student graduates or their enrollment status changes, the loan goes into a grace period of 6 months, thereafter, repayment must begin.

Federal Family Education Loans

The Federal Family Education Loan Program, also known as FFEL or FFELP, is administered by banks, credit unions and other participating lenders. If you qualify for the FFEL Stafford Loan, you will need to choose a lender. The amount you can borrow often depends on your year in school and, whether you have a subsidized or unsubsidized federal student loan.

Subsidized loans are awarded based on financial need, with the interest on the loan paid by the government while a student attends school; for the first six months after leaving school and if a student qualifies for deferment. In many cases, dental students tend to borrow subsidized federal student loans for an amount up to the annual loan borrowing limit for their level of study. Some borrow beyond the subsidized loan amount, even without demonstrating a financial, by using an unsubsidized FFEL loan.

Unsubsidized FFEL loans allow students to take advantage of payment options similar to that of a home or consumer loan. To determine eligibility, the total amount of the financial aid is subtracted from the cost of attendance. Because unsubsidized FFEL loans use private capital as their source, students are responsible for the interest from the time the loan is disbursed. The interest can be paid while a student is in school, or accrued and be added to the principal amount, increasing the amount that will need to repaid.

Stafford Loans

If you qualify for the FFEL Stafford Loan, you will need to choose a lender. If you qualify for the Direct Stafford Loan, the federal government, through the U.S. Department of Education, is considered your lender. The basic requirements for a Stafford loan is as follows: Students must:

  • complete the FAFSA application
  • be determined by the school as having a financial need
  • be a U.S. citizen, permanent resident, or eligible non-citizen
  • enrolled in school at least half-time
  • not be in default on any educational loan or owe a refund on an educational grant

The main reason that many students qualify for subsidized Stafford loans is that the household financial means are far less than what is needed to cover educational expenses. The federal government uses a universal formula to calculate a family's financial ability to assist in paying for their child's education. A student cannot receive a subsidized loan simply because their parents refused to pay for their college education.

The primary benefit of a subsidized Stafford loan is that the U.S. Department of Education pays the interest that accrues on the loan. If a borrower, while repaying the loan, needs to apply for a deferment, such as an unemployment deferment or because of a return to school, the government pays the interest during those periods, as well. Unsubsidized Stafford loans, on the other hand do not have this advantage. While it does offer higher borrowing limits, students are responsible for the interest that accrues on the unsubsidized loan from the time it is disbursed.

Nearly all dental students are eligible for a subsidized or unsubsidized Stafford loan, regardless of credit scores or other financial issues. They can also receive both types of loans for the same enrollment period, as long as the annual loan limits are not exceeded. Both offer a 6 month grace period either after graduation or after the borrower's enrollment status becomes less than half-time and both loans have a fairly modest annual limit for all college levels.

Perkins Loans

The Perkins loan offers low interest loans to dental students with a demonstrated financial need. The attending school is the lender, and although the loan is made with government funds, the school contributes a share and is the recipient of the repaid amount. The grace period for repaying a Perkins school loan is nine months after you graduate, leave school, or drop below half-time status. If you are on active military duty, the grace period may be longer. At the end of the grace period, you must begin repaying your loan. In some instance, people have been allowed up to 10 years to repay a Perkins loan.

The monthly payment on a Perkins loan is dependent on the loan amount and the length of the repayment period. Following is an example of typical repayments for a Federal Perkins Loan, including the total interest charges for three different 5% loans over a 10 year period.

Loan Amount

Number of Payments

Monthly  Payment*

Total Interest

Total Repaid

$4,000 120 $42.43 $1,091.01 $5,091.01
$5,000 120 $53.03 $1,364.03 $6,364.03
$15,000 120 $159.10 $4,091.73 $19,091.73
Table source: DOE
*Approximate estimate

This Website was compiled using a variety of resources and is not intended to substitute or replace the professional financial advice. The content provided is strictly for informational purposes on financing a career or education. Please seek additional information and consult a professional with any questions or concerns you may have regarding financing a dental or other professional career.

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