Loan information as explained by the
Department of Education
http://studentaid.ed.gov/PORTALSWebApp/students/english/index.jsp
In addition to Perkins Loans, the U.S.
Department of Education administers the Federal Family Education Loan (FFEL)
Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. Both
the FFEL and Direct Loan programs consist of what are generally known as
Stafford Loans (for students) and PLUS Loans (for parents).
Schools generally
participate in either the FFEL or Direct Loan program but sometimes participate
in both. Under the Direct Loan Program, the funds for your loan come directly
from the federal government. Funds for your FFEL will come from a bank, credit
union, or other lender that participates in the program. Eligibility rules and
loan amounts are identical under both programs, but repayment plans differ
somewhat.
How can I get a FFEL or Direct Loan?
For either type of
loan, you must fill out a FAFSA. After your FAFSA is processed, your school
will review the results and will inform you about your loan eligibility. You
also will have to sign a promissory note, a binding legal document that lists
the conditions under which you're borrowing and the terms under which you agree
to repay your loan.
How much can I borrow?
It depends on your
year in school and whether you have a subsidized or unsubsidized Direct or FFEL
Stafford Loan. A subsidized loan is awarded on the basis of financial need. If
you're eligible for a subsidized loan, the government will pay (subsidize) the
interest on your loan while you're in school, for the first six months after
you leave school, and if you qualify to have your payments deferred. Depending
on your financial need, you may borrow subsidized money for an amount up to the
annual loan borrowing limit for your level of study (see below).
You might be able to
borrow loan funds beyond your subsidized loan amount even if you don't have
demonstrated financial need. In that case, you'd receive an unsubsidized loan.
Your school will subtract the total amount of your other financial aid from
your cost of attendance to determine whether you're eligible for an
unsubsidized loan. Unlike a subsidized loan, you are responsible for the
interest from the time the unsubsidized loan is disbursed until it's paid in
full. You can choose to pay the interest or allow it to accrue (accumulate) and
be capitalized (that is, added to the principal amount of your loan).
Capitalizing the interest will increase the amount you have to repay.
You can receive a
subsidized loan and an unsubsidized loan for the same enrollment period as long
as you don't exceed the annual loan limits.
If you're a dependent
undergraduate student, each year you can borrow up to
·
$3,500 (for the 2007-08 academic year)
if you're a first-year student enrolled in a program of study that is at least
a full academic year.
·
$4,500 (for the 2007-08 academic year)
if you've completed your first year of study and the remainder of your program
is at least a full academic year.
·
$5,500 if you've completed two years of
study and the remainder of your program is at least a full academic year.
If you're an
independent undergraduate student or a dependent student whose parents have applied
for but were unable to get a PLUS Loan (a parent loan), each year you can
borrow up to
·
$7,500 (for the 2007-08 academic year)
if you're a first-year student enrolled in a program of study that is at least
a full academic year. No more than $3,500 of this amount may be in subsidized
loans.
·
$8,500 (for the 2007-08 academic year)
if you've completed your first year of study and the remainder of your program
is at least a full academic year. No more than $4,500 of this amount may be in
subsidized loans.
·
$10,500 (for the 2007-08 academic year)
if you've completed two years of study and the remainder of your program is at
least a full academic year. No more than $5,500 of this amount may be in
subsidized loans.
If you're a graduate
or professional degree student, each year you can borrow up to
·
$20,500 for the 2007-08 academic year.
No more than $8,500 of this amount may be in subsidized loans.
When you graduate with a graduate or
professional degree, the maximum total debt allowed from Stafford Loans is
$138,500. No more than $65,500 of this amount may be in subsidized loans. This
maximum total graduate debt limit includes Stafford Loans received for
undergraduate study.
These amounts are the
maximum yearly amounts you can borrow in both subsidized and unsubsidized FFELs
or Direct Loans, individually or in combination. Because you can't borrow more
than your cost of attendance minus the amount of any Federal Pell Grant you're
eligible for and minus any other financial aid you'll get, you may receive less
than the annual maximum amounts.
What's the interest rate?
For
all
For Stafford Loans
first disbursed between July 1, 1998 and June 30, 2006, the interest rate is
variable (adjusted annually on July 1st) but will not exceed 8.25 percent.
(You'll be notified any time the variable rate changes.) The interest rate for
these loans in 2007-08 is 7.22 percent. (This rate applies to loans in
repayment status; the rate may be lower during grace and deferment periods.)
When do I pay back my
After you graduate,
leave school, or drop below half-time enrollment, you will have a six-month
"grace period" before you begin repayment. During this period, you'll
receive repayment information, and you'll be notified of your first payment due
date. You're responsible for beginning repayment on time, even if you don't
receive this information. Payments are usually due monthly.
During the grace
period on a subsidized loan, you don’t have to pay any principal, and you won’t
be charged interest. During the grace period on an unsubsidized loan, you don’t
have to pay any principal, but you will be charged interest. You can either pay
the interest or it will be capitalized (added to your principal loan balance,
thus increasing the amount you’ll repay).
How do I pay back my loans?
You’ll repay your
FFEL Stafford Loan to a private lender or loan servicer. You’ll repay your
Direct Loan to the U.S. Department of Education’s
PLUS
Loans (Parent Loans)
Parents can borrow a
PLUS Loan to help pay your education expenses if you are a dependent undergraduate
student enrolled at least half time in an eligible program at an eligible
school. PLUS Loans are available through the Federal Family Education Loan
(FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan)
Program. Your parents can get either loan, but not both, for you during the
same enrollment period. They also must have an acceptable credit history.
How do my parents get a loan?
For a Direct PLUS
Loan, your parents must complete a Direct PLUS Loan application and promissory
note, contained in a single form that you get from your school’s financial aid
office.
For a FFEL PLUS Loan,
your parents must complete and submit a PLUS Loan application, available from
your school, lender, or your state guaranty agency. After the school completes
its portion of the application, it must be sent to a lender for evaluation.
Also, your parents
generally will be required to pass a credit check. If your parents don't pass
the credit check, they might still be able to receive a loan if someone, such
as a relative or friend who is able to pass the credit check, agrees to endorse
the loan. An endorser promises to repay the loan if your parents fail to do so.
Your parents might also qualify for a loan without passing the credit check if
they can demonstrate that extenuating circumstances exist. You and your parents
must also meet other general eligibility requirements for federal student
financial aid.
How much can my parents borrow?
The yearly limit on a
PLUS Loan is equal to your cost of attendance minus any other financial aid you
receive. If your cost of attendance is $6,000, for example, and you receive
$4,000 in other financial aid, your parents can borrow up to $2,000.
Who gets my parents' loan money?
Either the U.S.
Department of Education (for a Direct PLUS Loan) or your parents’ lender (for a
FFEL PLUS Loan) will send the loan funds to your school. Your school might
require your parents to endorse a disbursement check and send it back to the
school. In most cases, the loan will be disbursed in at least two installments,
and no installment will be greater than half the loan amount. The funds will
first be applied to your tuition, fees, room and board, and other school
charges. If any loan funds remain, your parents will receive the amount as a
check or in cash, unless they authorize the amount to be released to you or to
be put into your school account. Any remaining loan funds must be used for your
education expenses.
What's the interest rate?
For PLUS Loans
disbursed on or after July 1, 2006, the interest rate is fixed (at 7.90 for
Direct PLUS Loans and 8.50 percent for FFEL PLUS Loans). For PLUS Loans
disbursed between July 1, 1998 and June 30, 2006, the interest rate is variable
and is determined on July 1 of every year. For 2007-2008, the variable rate for
these PLUS Loans (in both the Direct and FFEL programs) is 8.02 percent.
Interest is charged on a PLUS Loan from the date of the first disbursement
until the loan is paid in full.
When do my parents begin repaying the loan?
Generally, the first
payment is due within 60 days after the loan is fully disbursed. There is no
grace period for these loans. Interest begins to accumulate at the time the
first disbursement is made. Your parents must begin repaying both principal and
interest while you're in school.
How do my parents pay back these loans?
They'll repay a FFEL
PLUS Loan to a private lender or loan servicer. They'll repay their Direct PLUS
Loan to the U.S. Department of Education's
PLUS
Loans for Graduate and Professional Degree Students
PLUS Loans for Graduate and Professional Degree Students
Graduate and
professional degree students are now eligible to borrow under the PLUS Loan
Program up to their cost of attendance minus other estimated financial
assistance in both the FFEL and Direct Loan Program. The terms and conditions
applicable to Parent PLUS Loans also apply to Graduate/Professional PLUS loans.
These requirements include a determination that the applicant does not have an
adverse credit history, repayment beginning on the date of the last
disbursement of the loan, and a fixed interest rate of 8.5 percent in the FFEL
program and 7.9 percent in the Direct Loan program. Applicants for these loans
are required to complete the Free Application for Federal Student Aid (FAFSA).
They also must have applied for their annual loan maximum eligibility under the
Federal Subsidized and Unsubsidized Stafford Loan Program before applying for a
Graduate/Professional PLUS loan.
*Please note all information contained in this statement
has been provided by the Department of Education website.