Direct Loan Program
Direct Loans are low-interest loans for students and parents to help pay for the cost of your college education. The lender is the U.S. Department of Education (DOE) rather than a bank or other financial institution. If you choose to use your Direct loans, you must complete Direct Loan Entrance Counseling and sign a Master Promissory Note (MPN) at www.studentloans.gov.
Direct Subsidized loan eligibility is based on need. No interest is charged to the student nor is repayment required while the borrower is enrolled at least half-time.
Direct Unsubsidized loans are available to students who do not qualify for a Direct Subsidized Loan or qualify for only a partial Direct Subsidized Loan. Under this program the borrower is responsible for the interest which accrues while the student is in school. The student may choose to make monthly payments while enrolled or defer all payments until six months after leaving school.
The Facts Regarding Federal Stafford Loans:
- In order to receive a disbursement of Direct Loans, students must meet the “conditions for receiving aid” and must be enrolled at least half time. Interest rates will be established each year for Direct Subsidized, Direct Unsubsidized and Direct Plus Loans. The interest rate will be the sum of a uniform index rate plus and add-on that varies depending on the type of loan and borrower’s grade level. For current rates, please visit: www.studentloans.gov.
- The federal loan limits for the Direct subsidized loan is $3,500 for freshmen, $4,500 for sophomores and $5,500 for junior and seniors. (An additional $2,000 unsubsidized loan is available to all grade levels).
- The Direct Loan Program offers loan repayment plans designed to meet the needs of almost every borrower. Borrowers may choose from the standard, extended, graduated, income contingent, or the income-based repayment plan.
- Students must complete Direct Loan Entrance Counseling in order to receive the loan disbursement. Loan Entrance Counseling allows you to understand your rights and responsibilities as a loan borrower. To complete the Loan Entrance Counseling, please visit: www.studentloans.gov.
- Students must also complete a Master Promissory Note (MPN). 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). To complete your MPN, please visit: www.studentloans.gov.
- In most cases, once you've submitted the MPN and it's been accepted, you won't have to fill out a new MPN for future loans. You can borrow additional Direct Loans on a single MPN for up to 10 years. Once you've completed the MPN you'll receive a disclosure statement that gives you specific information about any loan that the school plans to disburse under your MPN, including the loan amount, fees, the expected disbursement dates and the expected disbursement amounts.
While every student wants free money in the form of scholarships and grants, not everyone can get enough free money to cover the entire cost of college. If you’ve filled out your FAFSA and have been offered federal student loans, here are some things to consider:
- You don’t have to start paying back your federal student loans until you graduate or stop attending school at least half-time. If you get a private loan, you’ll probably have to start making payments right away.
- The interest rate on a federal student loan is almost always lower than that on a private loan—and much lower than that on a credit card!
- Students with greater financial need might qualify to have the government pay their interest while they are in school.
- You don’t need a credit record to get a federal student loan.
- You don’t need a cosigner to get a federal student loan.
- Federal student loans offer a variety of repayment plans, including one that base monthly payments on the borrower’s income.
- Some borrowers are able to have at least a portion of their loans forgiven if they work in certain jobs for which there is a high demand.
As you can see, a federal student loan is a much better option than a private loan or a credit card. However, do remember that you are responsible for repaying your loan, so don’t borrow more than you need for school-related expenses. If you find you’re going to have trouble making your payments, be sure to get in touch with your lender as soon as possible to see what arrangements can be made.