Get a loan

There are two kinds of education loans: loans based on financial need and loans that are not. Always check out need-based loan programs first, because they have lower interest rates and there’s no interest charged while you’re still in school.

Loans based on need are available to undergraduate, graduate and professional students who apply for financial aid and meet the financial need guidelines. Either the federal government or MIT lends you the money. You do not pay the loan back until you leave school.

Loans not based on need are available to all students as well as parents of undergraduate students. MIT offers various loan programs for you to consider, including federal and private loans. If you borrow as a student, you don’t have to pay the loans back until you leave school, but if your parents borrow, they start repaying right away. 

Information on specific loans varies according to a student’s program, so select which category you fall into:

• Undergraduate students and parents
• Sloan School of Management graduate students
• Other graduate and professional students

Choosing a repayment plan

When you obtain your loan, you will be asked what repayment plan you expect to use. Depending on the loan, you may be able to switch from one plan to another after starting repayment. Options vary among different loans, but may include:

Standard repayment – This plan gives you the option to pay less total interest than other plans because the repayment period is shorter. You make fixed payments of at least $50 a month for up to 10 years. Payments apply toward both the interest and the principal balance.

Extended repayment – This plan gives you lower monthly payments than standard repayment. It usually calls for fixed payments of at least $50 a month over a period that varies from 12 to 30 years.

Graduated repayment – This plan may work for you if you’re just starting your career and expect your income to increase steadily over time. Payments start out low and then increase, generally every two years over a period of 12 to 30 years. However, your monthly payment will never increase more than 1.5 times what you would pay under the standard repayment.

Income-contingent repayment – This plan, available only to Federal Direct Loan borrowers, gives you the flexibility to meet your obligations without causing you financial hardship. Payments are based on the borrower's income and the total amount of debt. Monthly payments (minimum of $5) are adjusted each year as the borrower's income changes. The loan term is up to 25 years; after that point, any remaining balance on the loan will be discharged, though you will have to pay taxes on the amount that is discharged.

Income-based repayment – This option will become available for some federal loans starting in July 2009. Payments are calculated on a sliding scale based on income and are capped at 15 percent of the family income above that level. No payments will be required if the borrower is below 150 percent of the poverty level (in 2007, about $31,000 for a family of four). Any unpaid amounts will be added to the loan balance in most cases. The Project on Student Debt has more information, and Finaid.org has a calculator to help borrowers compare the income-based repayment option with the standard repayment option. With income-based repayment:

When you're considering loans with different interest rates and repayment terms, it might help to use the online repayment calculator offered by the U.S. Department of Education.