Loans are sources of financial assistance that allow you to spread the cost of education over time. Loans are serious legal obligations. Loans must be repaid. We urge all first-time borrowers to spend some extra time learning about the loan process so that they can make informed choices throughout their education.
Loans are available from federal, state, and private lenders. We always encourage students to borrow their full federal loans before borrowing from state or private lenders. Federal loans are not credit based and do not require a co-signer. Federal loans also have significantly more borrower benefits than state or private lenders.
In order to accept your Federal Direct loan you must complete a two-step process where you complete Entrance Counseling and then sign a Master Promissory Note (MPN). For more information please go to our Counseling and MPN page.
The following loans are discussed:
- William D. Ford Federal Direct Loan Programs
- Subsidized Loans
- Unsubsidized Loans
- Parent PLUS Loans
- Grad PLUS Loans
Direct Subsidized Loans
The federal government will pay, or subsidize, the interest that accrues on a subsidized loan as long as the student is enrolled in at least 6 credits (this includes during deferment). Interest will accrue and will not be paid by the Department of Education while a student is in his/her grace period.
Direct Unsubsidized Loans
The interest will accrue during enrollment and can be paid on a quarterly basis (every 3 months) or can be capitalized (added to the principal) at the time of graduation.
Direct PLUS Loans
The Parent PLUS loan is a parent loan for undergraduate dependent students. The parent can borrow up to the full cost of attendance (less any other financial aid). The PLUS loan is credit based and there is no annual or aggregate (lifetime) loan limit. If a parent is denied a PLUS loan, they can add a co-signer or the student can receive an additional unsubsidized loan ($4,000 for Freshman and Sophomore students and $5,000 for Junior and Senior students) for the award year.
Direct Grad PLUS loans
The Grad PLUS loan is a student loan for graduate students. Students can borrow up to the full cost of attendance (less any other financial aid). The Grad PLUS loan is credit based and there is no annual or aggregate (lifetime) loan limit.
How much can a parent or student borrow?
Students and parents should carefully consider the amount of debt they incur and recognize their student loan is a future financial obligation. When applying for a Direct Loan the borrower must complete a Master Promissory Note (MPN) which is a legally binding agreement to repay the loan to the U.S. Department of Education.
There is a maximum amount of Subsidized and Unsubsidized loans that a student can borrow both per year and over their lifetime (aggregate). Annual loan limits are based on a student’s academic level (graduate or undergraduate) and dependency status. The aggregate loan limits are shown below.
Annual loan limits are based on a student’s academic level and dependency status. The annual loan limits for undergraduate students are shown below. Graduate students may borrow a maximum of $20,500 per academic year.
The maximum amount you can borrow each school year depends on your grade level and other factors. Below a chart is available which shows the maximum amounts that you may borrow for an academic year.
Are there any charges associated with Direct Loans?
The fixed loan interest rates for Direct Loans are as follows:
Direct Loan Interest Rates
|Direct Subsidized Loan||3.4%||3.4%||3.86%|
|Direct Unsubsidized Loan for Undergraduate Students||6.8%||6.8%||3.86%|
|Direct Unsubsidized Loans for Graduate and Professional Students||6.8%||6.8%||5.41%|
|Direct Parent PLUS Loans for Parents of Dependent Undergraduate Students||7.9%||7.9%||6.41%|
|Direct PLUS Loans for Graduate/Professional Students||7.9%||7.9%||6.41%|
For Direct Subsidized and Direct Unsubsidized Loans disbursed on or after July 1, 2013 but before December 1, 2013, the origination fee is 1.051%. For Direct Subsidized and Unsubsidized Loans disbursed on or after December 1, 2013, the origination fee is 1.072%.
For Direct PLUS Loans disbursed on or after July 1, 2013 but before December 1, 2013 the origination fee is 4.204%. For Direct PLUS Loans disbursed on or after December 1, 2013, the origination Fee is 4.288%.
When does the student or parent need to begin repayment of their loan?
Undergraduate and graduate students who have borrowed a Subsidized and Unsubsidized Loans have a 6-month grace period that starts the day after the student graduates, leaves school, or drops below half-time enrollment. The student would begin to repay his/her loan after the end of the grace period. Interest will accrue for both subsidized and unsubsidized loans during the grace period.
Parent PLUS Loan and Grad PLUS Loan repayment begins 60 days after the last disbursement of the loan for that school year is made; however, there is the option to defer repayment of a Parent PLUS Loan or Grad PLUS Loan.
What is the expected repayment amount per month?
Repayment plans usually range from 10 to 25 years, depending on the repayment. The monthly payment is based on the total amount borrowed and length of the repayment plan. The Department of Education provides information on Repayment Plans and Calculatorson their website.
There are several plans to choose for repayment, which can be changed at any time.
Can loan repayment be postponed?
In some cases, the borrowers may receive a deferment or forbearance that allows them to temporarily stop or lower the payment if they are encountering difficulty paying their loan. More information about deferments can be found at www.studentloans.gov.
Can a loan be cancelled?
The borrower is allowed to cancel his/her loan any time before the loan is disbursed or 14 days after disbursement. Keep in mind that the borrower agrees to repay the loan when he/she signs the MPN. In some circumstances, the loan can be discharged, or forgiven, after disbursement has occurred. More information about discharge or forgiveness can be found at www.studentloans.gov.
Private, or Alternate Loans
Private alternative loan programs have grown in popularity in recent years. However, we firmly believe that families should exhaust their eligibility for all federal loan programs before turning to this resource. In almost all cases, Direct Loans will provide the student and parent with more beneficial terms and conditions, including a lower annual percentage rate charged on the principal and fewer and lower fees.
Families are free to choose any private loan lender that best serves their needs. Families should visit each potential lender’s website to fully evaluate the benefits that they offer before making a final choice of a lender for their loans.