Federal Direct Student Loans
Student loans are financial aid assistance that must be repaid. To apply for Direct Loans, students must first complete the FAFSA.
The William D. Ford Direct Loan Program offers the following types of student loans:
· Subsidized: for students with demonstrated financial need, as determined by federal regulations. No interest is charged while a student is in school at least half-time, during the grace period, and during deferment periods.
· Unsubsidized: not based on financial need; interest is charged during all periods, even during the time a student is in school and during grace and deferment periods.
To take out a Direct Loan for the first time, you must complete a Master Promissory Note (MPN) and online loan entrance counseling before your loan can be disbursed. The MPN is a legal document in which you promise to repay your loan(s) and any accrued interest and fees to the Department. It also explains the terms and conditions of your loan(s). The entrance counseling helps you to understand your responsibilities regarding your loan. When you stop attending USAO, you will also be required to complete online loan exit counseling, even if your plans are to attend a different school or return at a later date. You can complete both your MPN and loan entrance counseling at www.studentloans.gov. You will be required to use your Department of Education-issued PIN. If you do not have a PIN, you may request one from the official PIN site.
You can borrow additional Direct Loans as an undergraduate student on a single MPN for up to 10 years. For each loan certified you will receive a disclosure statement that gives you specific information including the loan amount, fees, and the expected disbursement dates and amounts.
Student borrowers are not required to begin making payments until after they drop below half-time attendance. Once you are no longer enrolled at least half time in an eligible program, you'll receive one 6-month grace period on your Direct Subsidized and Unsubsidized Loans during which you are not required to make loan payments. You must begin repayment at the end of your grace period.
In the case of loans, keep in mind that whatever amount you borrow must be paid back with interest. You have the right to decline the loan or to request a lower loan amount.
The maximum amount you can borrow each year in Direct Subsidized and Unsubsidized Loans depends on your grade level and on whether you are a dependent or an independent student. The following table shows the maximum amount of money you may borrow each academic year in Direct Subsidized and Unsubsidized Loans:
Independent students and dependent students whose parents are unable to borrow a PLUS loan
$5,500 (maximum $3,500 subsidized)
$9,500 (maximum $3,500 subsidized)
$6,500 (maximum $4,500 subsidized)
$10,500 (maximum $4,500 subsidized)
3rd- and 4th-year undergraduate
$7,500 (maximum $5,500 subsidized)
$12,500 (maximum $5,500 subsidized)
The actual loan amount you are eligible to receive for an academic year is determined by the financial aid office based on your overall eligibility and financial aid package and may be less than the maximum annual amounts shown in the chart above.
Below are the aggregate (total) limits for Direct Subsidized and Unsubsidized Loans:
· $31,000 for dependent undergraduate students, excluding those whose parents are unable to borrow a PLUS Loan (no more than $23,000 may be subsidized)
· $57,500 for independent undergraduate students and dependent undergraduates whose parents are unable to borrow a PLUS loan (no more than $23,000 may be subsidized)
These aggregate limits include both Direct Subsidized and Unsubsidized Loans and any subsidized and unsubsidized Federal Stafford Loans received through the Federal Family Education Loan (FFEL) Program.
For more Direct Loan information and guidance regarding student loan repayment options including assistance for consolidation, deferment, forbearance, and loan cancellation for teachers; please visit the Direct Loan website at: www2.ed.gov/offices/OSFAP/DirectLoan/student.html.
Federal Direct PLUS Loans
If you are a dependent student and your financial aid package does not meet your full cost of attendance, your parent may be able to take out a Federal Direct Parent Loan for Undergraduate Students (PLUS). PLUS loans are available to provide a parent with additional resources to help pay the educational expenses of an undergraduate student, who is enrolled at least half time. Since the parent is the borrower, the responsibility of repaying PLUS loans rests with the parent rather than the student. As the PLUS loan accrues interest at a higher interest rate than the unsubsidized student loan and repayment begins immediately, USAO encourages that student loan eligibility be maximized before applying for a PLUS loan.
When applying for a Direct PLUS Loan, the Department of Education will check the credit history of the applicant to determine approval. If denied, the applicant may choose to obtain an endorser who does not have an adverse credit history to try to gain approval. In some cases, a parent may also be able to obtain the PLUS loan if they provide documentation to show that there are extenuating circumstances related to the adverse credit history. If the PLUS loan is denied, the student may have the option to borrow additional unsubsidized student loan.
The maximum PLUS amount is equal to the student’s cost of attendance minus any other financial aid received and will be determined by the financial aid office.
To apply for a Direct PLUS Loan, you must complete a PLUS Application and Master Promissory Note (MPN). This MPN will remain effective for 10 years. A parent can begin the PLUS process at www.studentloans.gov, using their Department of Education-issued PIN. If your parent does not have a PIN, they may request one from the official PIN site.
For more information on the Federal PLUS Loan program, go to: www2.ed.gov/offices/OSFAP/DirectLoan/parent.html.
Federal Perkins Loans
The Federal Perkins Loan Program provides need-based low-interest loans to help students finance the costs of postsecondary education. Funding for this program is extremely limited. Eligibility is based on the student’s financial need as determined by the FAFSA in addition to funding availability. The maximum Perkins loan amount at USAO is $4,000 per academic year. Borrowers who undertake certain public, military, or teaching service employment are eligible to have all or part of their loans canceled. If awarded a Perkins loan, the borrower will complete paperwork with the USAO Business Office. Loan repayment will also be made to the USAO Business Office.
For more information on the Federal Perkins Loan program, go to: www2.ed.gov/programs/fpl/index.html.
Alternative or Private Loans
Some students and families seek loan funds that exceed the amount they are eligible to borrow from the federal student loan programs. Alternative, or private, loans are student loans that assist families in meeting the cost of their education that traditional financial aid and their own resources can not cover. These loans are generally more expensive than the federal student loans and therefore should not be considered until AFTER you have exhausted all federal loan options. Most of these loans must be certified (processed) by the Financial Aid Office. All of these loans must be considered part of your financial aid package.
Alternative, or private, loans are credit-based loans, often require co-signers, and are unable to be consolidated with federal student loans. Students that borrow from both federal and private loans will typically have multiple payments which could make the total monthly payment higher than it would be if the same amount was borrowed from a single source.
Research and shopping around for the best loan is absolutely vital when it comes to alternative loans. There is no interest rate cap on these loans. Start looking at your current financial relationships to see what they may have to offer. Use the internet, the library, and on-line search tools. Remember - the choice is yours. If you must borrow these additional loans, borrow wisely!
You are free to choose any eligible lender when applying for an alternative or private loan.
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