Federal Loan

Federal Direct Loans

Unlike grants and scholarships, student loans must be repaid. Federal direct student loans have a fixed interest rate and are administered by the U.S. Department of Education. They can be subsidized or unsubsidized so you won’t pay interest immediately. First-year and incoming transfer students should file the FAFSA® to determine their eligibility for federal student loans. The two types of direct loans are as follows:

Subsidized

• Based on financial need

• The federal government pays the interest on the loan while the student is in school and when qualifying for an authorized deferment.

Unsubsidized

• Non-need-based loan for students who do not qualify for a subsidized loan or who do not qualify for the total annual limit of a subsidized loan

• The student is responsible for the interest that accumulates on the loan.

• The student can pay the interest while in school or defer it, capitalizing on the loan's principal.

Lifetime Federal Direct Loan Limits

Repayment of Federal Stafford Loans is required six months after a student withdraws, drops below half-time status, or graduates from school (ceases to be enrolled or to maintain continued enrollment).  The standard loan repayment and amortization is for ten years but can be consolidated or arranged for a more extended period.

Federal Direct PLUS Loans

The Federal Direct PLUS Loan program can help parents cover college costs. PLUS loans have a fixed interest rate and are administered by the U.S. Department of Education. They’re available to parents of dependent undergraduate students.

To qualify, a student must file a FAFSA®, and the parent borrower must undergo a credit check. Loans are not need-based; amounts are based on a student’s cost of attendance. There are no annual or lifetime loan limits for a PLUS loan.

Federal Direct Grad PLUS Loans

Federal Graduate PLUS loans are available for graduate and professional students to borrow. Like the Parent PLUS loan for parents of dependent undergraduate students, the Graduate PLUS loan is an unsubsidized, federally guaranteed education loan with no annual or aggregate limits. It has no grace period and goes into repayment when the funds are disbursed to the borrower. It has the same deferment and forbearance options as the federal direct loan program. As such, graduate and professional students can postpone repayment using in-school deferment while enrolled at least half-time in a degree or certificate program.

Interest rates on Federal PLUS loans are fixed at 7.9%. Many lenders offer borrower benefits to reduce this interest rate during repayment. During any period of deferment or forbearance, interest can accrue and be added to the principal loan balance (capitalized) at the end of the deferment or forbearance period if the borrower does not pay it as it accrues. Due to regulations, a 3.0% origination fee is attached to the loan that the lender cannot pay on the borrower’s behalf.

Eligibility for PLUS loans requires the applicant to (1) be a U.S. citizen/national or eligible non-citizen with a valid Social Security number, (2) pass a credit review and not have an adverse credit history as defined by regulation (see credit criteria below), and (3) not be in default on any federal education loan or owe a refund on a federal education grant.

To get a PLUS loan, the applicant cannot have adverse credit based on reviewing at least one credit report from a national credit reporting agency. A lack of or bad credit history is not considered adverse credit. Current regulations define adverse credit as when at least one of the following applies to the applicant:

• is currently 90 days or more delinquent on repayment of any debt;

• has had debt discharged in bankruptcy during the past five years; or

• evidence exists of a default, foreclosure, tax lien, repossession, wage garnishment, or write-off of a Title IV debt during the past five years.

If the applicant has adverse credit, they can provide an endorser (cosigner) who does not have adverse credit to get a PLUS loan.

How to Apply

To receive federal financial aid, students must fill out the FAFSA® as soon as possible after January 1 of each year they plan to attend school.

Parents can apply for a PLUS loan by completing a Direct PLUS Loan application and Master Promissory Note (MPN), and the school's financial aid office can provide additional instructions. The office may also offer the option of completing the PLUS application and MPN online at StudentAid.gov.