What are Federal Student Loans?
Federal Direct Loan Program is a program that provides low-interest loans for students and parents. Students must be enrolled at least half-time to receive a loan. An origination/guarantee fee of 1-4% may be assessed prior to each disbursement. The interest rates are determined annually in June. If the student is financially eligible for the loan, the Federal government will pay the interest while the student is in school. If they are not financially eligible, the student is responsible for the interest and may pay it while attending school or have it added to the principal for later repayment. Repayment of principal and interest begins six months after the student ceases to be enrolled at least half-time.
Types of Federal Student Loans
Federal Direct Subsidized Stafford Loan
- $3,500 for the first year of undergraduate study (0-29 hours)
- $4,500 for the second year of undergraduate study (30-59 hours)
- $5,500 per year for subsequent undergraduate years (60+ hours)
Students may borrow up to $23,000 for undergraduates.
Additional Unsubsidized Stafford Loan
Dependent students may borrow $2,000 per year for four years. Independent students may borrow additional amounts listed. The student is responsible for the interest and may pay it while attending school or have it added to the principal for later repayment.
- $4,000 per year for the first two years of undergraduate study (0-59 hours)
- $5,000 per year thereafter (60+ hours)
Dependent students may borrow a maximum of $8,000. Independent students may borrow a maximum of $57,500.
Federal PLUS Loan
Parents of students may borrow annually the amount of the student's cost of education minus other aid for each child who is enrolled at least half time and is a dependent undergraduate student. PLUS is limited to parents who do not have an adverse credit history. Late payments on outstanding obligations are not to be considered as having adverse credit history. The current interest rate is 6.84%, with the borrower beginning payment within sixty days of final loan disbursement for the school year. Graduate students may also borrow under the PLUS loan program. They have to meet the same credit history requirements, must apply for Federal financial aid and may borrow up to the cost of attendance less other financial aid. As with the Parent PLUS, the current interest rate is 6.84%. Some lenders may require in-school deferments each term.
Steps for Getting a Student Loan
- A student fills out a Free Application for Federal Student Aid (FAFSA) at www.fafsa.gov.
- US Department of Education send a Student Aid Report (SAR) to the student and student's selected colleges. The SAR includes your FAFSA answers and basic eligibility information.
- Once a student is admitted to the college, the college reviews the SAR to determine the student's eligibility for financial aid and sends the student an aid offer.
- The student chooses a college and decides which financial aid to accept.
- If a student accepts a Direct Subsidized Loan, a Direct Unsubsidized Loan, or a Direct PLUS Loan, the college notifies the US Department of Education and requires first-time borrowers to sign a promissory note and complete loan entrance counseling. Loan Entrance Counseling helps you understand your obligation to repay your loan.
- The student must sign the promissory note and complete loan entrance counseling. A Promissory note is a legal document in which you promise to repay your loan. It also explains the terms and conditions of your loan.
- The US Department of Education provides loan funds to the college.
- The college applies the loan funds to the student's account and provides any remaining balance to the student.
- The US Department of Education assigns the student's loan to a loan servicer. A loan servicer is a company that collects payments on the loan, answers questions, and performs other administrative tasks associated with the loan.
- When the student graduates, leaves school, or drops below half-time enrollment, the student must complete loan exit counseling. Loan exit counseling explains your loan repayment responsibilities and when repayment begins.
- After a grace or deferment period, the student begins repaying the loan. If the student has any questions or needs help with loan repayment, the student contacts the loan servicer.
The process for receiving some federal student loans, including Federal Perkins Loans and Direct PLUS Loans for parents, is different. To learn more about these and other federal student loans, visit http://www.studentaid.gov/loans. To get information on loan repayment, visit http://www.studentaid.gov/repay.
Student Loan Resources
- Direct Loan Entrance Counseling
- Direct Loan Master Promissory Note (MPN)
- Direct Parent PLUS Loan Application
- Online Loan Exit Interview
- Title IV Loan Code of Conduct
- FSA Student Loan Ombudsman's Office
- Smart Borrowing Resource
- Private Loan Lenders List
- Loan Repayment Estimator