Navigating VSAC Student Loans: A Comprehensive Guide

For many students aspiring to higher education, student loans are a necessary tool to bridge the gap between available resources and the cost of tuition, room, board, books, supplies, and transportation. In Vermont, a significant majority of families rely on borrowing to finance educational pursuits. Understanding the landscape of student loans, particularly those offered by the Vermont Student Assistance Corporation (VSAC), is crucial for making informed decisions and minimizing long-term debt.

Understanding the Basics of Borrowing

Borrowing money for education can feel overwhelming, but by understanding the basics, students and families can navigate the process with confidence. Bills for the fall semester arrive quickly, making these decisions time-sensitive. VSAC’s My Education Loans Guide is a helpful resource for learning the fundamentals of borrowing.

Maximizing "Gift" Money

Before considering loans, it's essential to exhaust all sources of "free" money. This involves completing the Free Application for Federal Student Aid (FAFSA) to access federal grants, and submitting the Vermont Grant application for state-level aid.

Verifying Financial Aid Offers

After receiving financial aid offers from schools, carefully check tuition bills to ensure all grants and scholarships are listed as "credits." If any discrepancies arise, contact the school's financial aid office to verify eligibility and confirm the receipt of funds. Inquire about any additional steps required to apply free aid to the tuition bill.

Types of Loans: Federal vs. Private

Loans are designed to fill funding gaps after maximizing "free" money. Federal Direct Loans, if eligible, will be included in the school's financial aid package upon filing the FAFSA. It is important to understand the loan terms, as these loans must be repaid with interest.

Federal Direct Loans

These loans are in the student's name, making them responsible for repayment. Federal Direct Loans are often recommended as the first borrowing option due to their flexible repayment options, including deferment while enrolled at least half-time and a six-month grace period before repayment begins. There are two types of Federal Direct Loans:

Subsidized Loans: Based on financial need, the government may pay the loan's interest while the student is in school at least half-time, for the first 6 months after leaving school, and during any periods of deferment.
Unsubsidized Loans: Not based on financial need, the student is responsible for paying the loan's interest as soon as the loan is disbursed.

Federal Direct Student Loans have annual borrowing limits. For loans first disbursed July 1, 2024 - June 30, 2025, the interest rates are 6.53% fixed for undergraduate students and 8.08% fixed for graduate or professional students. In addition, there is a fee of 1.057% (Oct 1, 2020-Sept 30, 2025).

Federal Direct PLUS Loans

Students and families can use Federal Direct PLUS Loans, or private loans, to supplement costs that remain after students take out federal student loans.

Federal Direct PLUS Loans are designed for parents (and graduate students) to cover up to the full remaining cost of a student’s attendance. The person taking out the loan is responsible for payments. The Federal Direct PLUS Loan for parents (not students) can have a higher rate than many other private loans. In addition, these loans currently have an origination fee.

For Direct PLUS Loans, graduate students have an interest rate of 8.05% fixed (July 1, 2023-June 30, 2024) and fees of 4.228% (Oct 1, 2021-Sept 30, 2026). Parents have an interest rate of 8.94% fixed (Loans first disbursed July 1, 2025-June 30, 2026) and fees of 4.228% (Oct 1, 2021-Sept 30, 2026).

Read also: Guide to UC Davis Student Housing

Private Loans

Private loans can be in a student’s name, or a parent’s name. Private loans vary greatly with each lender setting their own terms and offering different interest rates, fees, and repayment options.

Choosing the Right Loan: Interest Rates, Fees, and Repayment

Selecting the right loan requires careful consideration of interest rates, fees, and repayment options.

Interest Rates: Fixed vs. Variable

When shopping for a loan, consider the full range of rates that are advertised. Each borrower will qualify for a different rate based upon their personal circumstances. It’s important to look at the full range of rates to make sure you’re not distracted by a rate you’re not eligible for.

Fixed Interest Rates: Remain constant over the life of the loan.
Variable Interest Rates: Fluctuate with financial markets, potentially increasing the overall cost of the loan.

Beware of super-low "teaser" interest rates for which few people qualify. Never sign/approve a loan without knowing what you might ultimately pay.

Fees

Loans can have fees, either when the loan is made or when repayment starts, and you may end up being charged higher fees than the ones you saw advertised.

Read also: Investigating the Death at Purdue

Repayment Options

Repayment is an important variable, which can be based on your personal circumstances. Some loans offer repayment options to help borrowers during times of hardship. For example, VSAC offers limited suspension of payments and reduced payments.

VSAC Student Loans: Features and Benefits

VSAC offers student loans to Vermont students attending colleges in Vermont or elsewhere, as well as to students from other states attending colleges in Vermont. VSAC assists Vermont families in applying for as much free aid as possible while guiding them in reducing their borrowing costs.

Eligibility Requirements

To be eligible for a VSAC Student Loan, applicants must be a U.S. citizen or eligible non-citizen and eligible for federal student aid.

Cosigner Requirement

VSAC requires a credit-eligible cosigner for their VSAC Student Loan, who is equally responsible for repaying the loan. Cosigner responsibilities include making payments and signing all paperwork. Cosigners receive the same monthly bill statement and have the loan's payment status reported to national credit bureaus.

Cosigner Release

Cosigner release is available to qualified student borrowers after 48 months of active repayment, provided the student borrower meets VSAC's credit criteria.

Loan Cancellation

Loan debt is cancelled completely if the student dies or becomes totally and permanently disabled.

VSAC Student Loan Repayment & Interest Rate Options

The fixed interest rate is determined by the creditworthiness of the cosigner, the loan term, and the repayment option chosen during application. Borrowers who enroll in automated debits through VSAC's LoanPay system receive a 0.25% interest rate discount.

The information below is for loans for the 2025-2026 school year:

Immediate: Start principal and interest payments right away. Fixed interest rate of 5.50% to 7.08% APR. First monthly payment due within 45 days of the final disbursement to the school. Least expensive option over the life of the loan.
Interest only: Make monthly interest payments while enrolled (at least half time). Fixed interest rate of 7.44% to 8.64% APR. First monthly payment of interest due within 45 days of the final disbursement to the school. Reduced-cost option over the life of the loan.
Deferred: Begin repayment after at least half-time enrollment ends. Fixed interest rate of 8.03% to 9.07% APR. First monthly payment of principal + interest due within 45 days after at least half-time enrollment ends. Most expensive option over the life of the loan.

You'll pay less over the life of your loan if you pay as you go-full or interest payments can go a long way in reducing the overall amount you pay back.

Loan Repayment Terms

Borrowers choose a repayment option (immediate, interest-only, or deferred) and either a 10- or 15-year repayment term. Payments are required monthly.

VSAC Student Loan Amounts & Payments

With the VSAC Student Loan, you choose the amount you want to borrow for each academic year. Your school will certify your eligibility and schedule disbursements based on your enrollment period.

Minimum loan amount: $500
Maximum loan amount: Up to the cost of your education, minus any other aid, as determined by your financial aid office
Minimum monthly payment amount: $20

Applying for financing for the full academic year has benefits: saves you time, reduces paperwork and correspondence for you and your cosigner, prevents delays in your subsequent disbursements, minimizes credit bureau inquiries.

Online Loan Payments

Students can specify which account they want to pay on if they are paying online and have their own loans or cosigned for multiple students. Pay your VSAC loan with no added transaction fee, make payments anytime day or night-with 24/7 online access, and set up automatic monthly loan payments-so you don’t have to worry about paying on time each month.

Refinancing Options

VSAC offers refinancing options for student loans.

Responsible Borrowing: Minimizing Loan Costs

It’s tempting to borrow the full amount of loans to cover your education expenses, but keep in mind that all loans are borrowed money that must be paid back with interest. This means that the amount you repay will always be more than the amount you borrow. Having options can make things unclear at times. Your goal should be to minimize loan costs as much as possible.

Determining How Much to Borrow

It can be hard to know exactly how much money you will need until you’re living the school experience. If you’ve borrowed more than you need, you can request the loan to be reduced.

Tips for Minimizing Loan Debt

Take advantage of free aid first: Apply for all available grants and scholarships.
Use savings and current income: Explore tuition payment plans.
Accept a work-study job: Or consider a part-time job while in school.
Cut expenses and economize while in school: Live like a student in school so you don't have to live like one for 10 years after graduation.
Understand how the interest rate and the repayment plan you choose will impact your cost of borrowing.
Borrow only what you need: Your goal should be to minimize loans as much as possible.

Understanding Credit Inquiries

Loan shopping during a certain timeframe (30 days is a good rule of thumb, though this can vary), generally will have little to no effect on your credit score. If you’re not offered loan terms (rates & fees, for example) that you expected when you applied for a particular loan, stop your application and ask why.

Navigating the VSAC Loan Application Process

Online Application

The online application takes just a few minutes to complete. A reference is someone you have known for at least 3 years who you will always be in contact with. The loan period is the enrollment term for which the loan is being borrowed.

Loan Amount

You can borrow up to the cost of attendance minus any other aid, as determined by your school’s financial aid office. You don’t have to borrow the full amount that you're eligible for-we recommend that you borrow only what you need! The loan can be used to cover the cost of education minus any other financial aid.

Final Disclosure and Right to Cancel

Once the loan is approved, VSAC will provide the borrower with a Final Disclosure. The Right to Cancel period begins when the loan is approved-during this time you have the option to cancel or reduce the loan amount. VSAC must wait for this period of time to end before sending money to the school.

Loan Disbursement

Once your application is approved and all of your steps are completed, VSAC disburses funds directly to your school according to the school's disbursement calendar. Typically, one disbursement will be sent in fall, and a second in January or February.

Loan Usage

Loans can be used to cover the cost of education minus any other financial aid. Contact your school’s financial aid office to confirm what is included in your total cost.

Making Changes to Your Loan

You cannot change the repayment plan once you submit your application. A new loan is required each academic year. You can't add to your existing VSAC Student or Parent Loan.

Cosigner Information

Every VSAC Student Loan requires a cosigner who meets VSAC’s credit criteria. If your cosigner is denied, you'll need to start a new loan application with a different cosigner.

Cosigner Responsibilities

If you're a cosigner, you have a responsibility to support the student during the life of their loan. Together you both should:

Create a financial plan for repayment
Communicate on repayment issues
Discuss loan payments
Sign all paperwork
Research cosigner release options

The cosigner is also required to sign all paperwork along with the student borrower. As a cosigner, you'll also receive billing statements and the loan(s) you cosigned will appear on your credit report.

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