Information About Student Loans

If you decide to take out a loan, make sure you understand the terms and conditions of the loan. Student loans can come from the federal government, Loans made by the federal government, called federal student loans, usually offer borrowers lower interest rates and have more flexible repayment options than loans from banks or other private sources.

Federal Loans

Unlike scholarships or the Work-Study Program, the student loan is money that must be repaid to the Department of Education with interest. Student loans are a legal obligation to pay. This though has not completed their studies, not are satisfied with the education or get a job once you graduate. The Direct Loan Program of the Department of Education has the following loans available. Direct Loan Subsidized and Unsubsidized and PLUS Loan. This program offers several advantages, among these are: low interest rates, various payment options, among others.

Direct Loan Subsidized

The Direct Subsidized Loan is based on financial need, so the Department of Education of the United States pays the interest while you are enrolled, during the grace period or in periods of deferment (Loans granted between July 1, 2012 and July 1, 2014 will not be subsidized interest during the grace period). If during the grace period you choose not to pay interest that accrues, it will be added to your principal balance. This loan is available for Undergraduate students.

Direct Unsubsidized Loan

The Direct Unsubsidized Loan is not based on financial need, so interest accrues from the time it is disbursed until the debt is paid in full. The borrower has the option to pay the interest as it accrues or allow them to be added to principal. This loan is available for Undergraduate students and graduate level.

Direct Plus Loan

Direct Plus Loan is available to graduate level students and to parents of dependent children under the criteria used by the Department of Education. The maximum amount to request is the cost of attendance (COA) minus additional financial aid received. Borrowers should not have a negative credit history.

This is not based on financial need, so interest accrues from the time it is disbursed until it is paid in full. The borrower has the option to pay the interest as it accrues or allow them to be added to principal. Responsibility for payment of a Parent PLUS Loan cannot be transferred to the student, so that the applicant or co-signer will be responsible for payment. The first payment for a Plus Loan is due within 60 days of disbursement of the loan in full. There is no grace period for this type of loan.

Eligibility Requirements

To be eligible for Federal Direct Loan Program, you must comply with the Federal Department of Education and Institutional requirements. If you don’t comply, your application for student loans will be canceled at any time:

  • Be a U.S. citizen or elegible non-citizen.
  • Have a valid Social Security number.
  • Complete a Free Application for Federal Student Aid (FAFSA).
  • Not owe a repayment or be in default under any state or federal grant, loan, or scholarship program.
  • You need to have an Unmet need, except in some loan programs.
  • You can’t have an institution suspension.
  • Need academic progress, even though students on academic probation qualifies if they are in the process of appealing and have approval of such process or has an approved academic plan.
  • Is required to register a minimum of 6 credits (undergraduate) or 3 credits (graduate).
  • An undergraduate student qualifies for a subsidized (does not accrue interest while you attend school) and unsubsidized loans (accrues interest after the first school disbursement) A graduate student qualifies for unsubsidized loan only.
  • You must complete a Master Promissory Note (MPN) The MPN is a legally binding agreement to repay your loan to ED. Also, you must complete an entrance counseling. Entrance counseling is a mandatory Information session which takes place before you receive your first federal student loan”* Visit: https://studentloans.gov/myDirectLoan to complete these processes.
  • Complete and turn in all necessary documentation required by your institution Financial Aid office.
  • Males between 18-26 years of age are required to register on the Selective Service system.

Annual Loan Limits

Undergraduate Dependent Students

Years of Study Subsidized Loan Unsubsidized Loan Annual Maximum
1 year (0-30 credits) $3,500 $2,000 $5,500
2 year (31-60 credits) $4,500 $2,000 $6,500
3 years on above (61-90 credits) $5,500 $2,000 $7,500

Undergraduate Independent Students

Years of Study Subsidized Loan Unsubsidized Loan Annual Maximum
1 year (0-30 credits) $3,500 $6,000 $9,500
2 year (31-60 credits) $4,500 $6,000 $10,500
3 years on above (61-90 credits) $5,500 $7,000 $12,500

Graduate Students

Years of Study Subsidized Loan Unsubsidized Loan Annual Maximum
**** $0.00 $20,500 $20,500

Loan Maximum Upon Graduation

Status Ammount
Demendents Up to $31,000. No more than $23,000 in subsidized and $8,000 unsubsidized.
Independents Up to $57,500. No more than $23,000 in subsidized and $34,500 unsubsidized.
Graduates Up to $138,500. No more than $65,000 in subsidized loans, this ammount includes the subsidized loans at undergraduate.
Note: The maximum amount you can borrow each school year depends on your grade level and other factors. The actual amount you are eligible to borrow each year is determined by your school and may be less than the maximum amount.

Interest Rates & Costs of Origination

The Direct Loan Program has fixed interest rates and origination costs which are determined and changed annually. Here are the percentages for the academic year 2016-2017.

Undergraduate

Subsidized Loans 4.45% (fees 1.066%)
Unsubsidized Loans 4.45% (fees 1.066%)

Graduate

Unsubsidized Loans 6.00% (fees 1.066%)

Plus Loan Consolidation Loans

Plus Loans 7.00% (fees 4.264%)
Consolidation Loans Not to exceed 8.25%

Disbursement of the Loan

After 30 days of beginning of the enrollment at least half time and if you do not owe any documents that prevent the disbursement, the institution is going to apply first to the student's account. If there is any excess or surplus, it will be sent to the parent or student (as appropriate), unless the student authorizes the institution holding the funds. Any remaining funds must be used for education expenses. For more information you may contact the Financial Aid Office.

New Regulation of New Loan Borrowers

Limitation Direct Subsidized Loan

As of July 1, 2013, if you are a first time borrower and you receive a Subsidized Direct Loans have a maximum time limit to be eligible for subsidized interest loans. In general you should not receive Direct Subsidized Loan by more than 150% of their program of study. This is called maximum eligibility period. (SULA) for its acronym in English. The period of eligibility is based on the term of your program of study. So your maximum eligibility could be modified if the program is changed. Generally, Direct Subsidized Loans received in their previous program of study will be counted against your new eligibility period.

Once you lose your eligibility to receive Direct Subsidized Loans may receive no Subsidized Direct Loans. In addition, if you continue enrolled after losing eligibility under certain circumstances the Department of Education will pay the interest on subsidized loans received. Any accrued unpaid interest will be added to your principal balance, either at the end of your grace period, deferment, among others.

For more information about Student loans and new regulations visit: www.studentaid.ed.gov/es/types/loans.

Maximum Eligibility Period Examples (MEP)

Program Length 150% Duration of Your Program MEP
5 Years Bachelor's Degree X 1.5 7.50 years
4 Years Bachelor's Degree X 1.5 6.00 years
2 Years Associate's Degree X 1.5 3.00 years

Separation of Studies / Grace Period

After the first separation from his studies occur, for example: graduates, discontinue studies or reduce your enrollment to less than half time, you will begin the six months prior to the payment of the principal of the student loan, and this is known as the period of grace. Also, to comply with the Department of Education you have to complete the Exit Counseling visiting: www.studentloans.gov.

If you received a Direct Subsidized Loan that was first disbursed between July 1, 2012 and July 1, 20 14, you will be responsible for paying any interest that accrues during your grace period. Unsubsidized and Plus loans accrue s interest and during these months, so you will have the option to pay or let them be added to the principal. If you are active in the Armed Forces , you could have a longer grace period to those listed here, and have additional options to postpone the payment of your loan.

Repayment Plans

The Department of Education provides several options for payment plans, conform to the economic situation of the borrower. The following payment plans available:

  • Basic - Fixed payments up to 10 years to repay.
  • Extended - For loans more than $ 30,000 balance, with up to 25 years to repay.
  • Gradual - Monthly fees are comfortable at first, and then they usually increase every two years up to 10 years pay.
  • Income Contingent (ICR), Income Based (IBR) and Pay as You Earn (PAYE) - Payments are calculated annually and is based on annual income (and the spouse if married), number of household members and the total loan amount. The remaining loans could be forgiven after 20 to 25 years.

Loan Consolidation

The main objective of the Direct Consolidation Loans Program, is to help the borrowers to manage their debt, by placing all the student loans under one account. Some of the benefits are: one Service Agency, one payment, easy monthly payments, fixed interest rate and variety of payment plans.

Consider the following before you start to consolidate: access the Department of Education at www.nslds.ed.gov to find out if you have more than one agency managing your loans, also, make sure to check your loans status since they cannot be: In-School Deferment, Bankruptcy, Legal Settlement, or Foreclosure.

One disadvantage of consolidating your loans is the fact that it can extend the amount of years to make payments resulting in more interests accumulated.

Consolidation of your loans will give you the option to select a payment plan: Basic, Extended, Gradual, Income Contingent.

The consolidation process can be done:

  • During the grace period (6 months after ending college).
  • During the repayment period (The day after ending the grace period).
  • During forbearance or deferment periods.
  • If the account is on Default, you can make payment arrangements with the agency managing your loans.

To apply for a Consolidation visit https://studentloans.gov/myDirectLoan or you can call 1-800-557-7392. It takes approximately 30 to 60 working days to complete the process. During this period of time, you are responsible for making payments to the agency that is handling the consolidation.

Postpone Payment

Under certain circumstances it might postpone for specific and limited time payment of a student loan. This options are known as Deferments and / or Forbearances. If you are unemployed, facing economic difficulties, receives aid from the government, is enrollment at least half time, you may qualify. You should contact the Service Agency loan. For additional information visit www.studentaid.ed.gov.

Loan Discharge

There are circumstances where you can cancel the debt of the federal student loan whenever it is not in default of the loan. The cancellation releases you from any obligation to repay the loan debt. Among these are:

  • Sudden closure of their institution before completing their program of study.
  • Your school falsify your signature on your promissory note or falsely certified your loan was eligible.
  • Identity Theft.
  • You withdraw from school but the establishment did not pay a refund owed as its written the Institution policy.
  • Bankruptcy, provided they check in bankruptcy court that repaying the loan would cause undue hardship. For more information, visit https://studentaid.ed.gov/sa/.

Forgiveness

  • The Department of Education offers several types of forgiveness for borrowers who work full time and meet other requirements:
  • Teaching Service - If you teaches in a low-income school or educational service agency, you may qualify for this benefit. This provision is not available for PLUS loan borrowers. The amount of forgiveness could range from $ 5,000 to $ 17.500 depending on the specialty.
  • Public Service - If you work full time in a public entity and has made 120 payments on his or her Direct Loan Program (after October 1, 2007), the remaining balance may qualify for this cancellation.

For more information, visit www.studentaid.ed.gov or contact your Service Agency loan.

Total and Permanent Disability

f you become disable, your loan might be permanently discharge, if it is determined that you are totally and permanently disabled and meet certain requirements. To apply for a permanent discharge of your loans, you have to submit a certification from a physician certifying that you are totally and permanently disabled.

Death

If you, the borrower, die, then your federal student loans will be discharged. If you are a parent PLUS loan borrower, then the loan may be discharged if you die, or if the student on whose behalf you obtained the loan dies. The loan will be discharged if a family member or other representative provides a certified copy of the death certificate to the school or to the loan servicer.

Default

Do not make your loan payments for 270 days or more, according to the terms and conditions of your Master Promissory Note will cause your loan is declared in default. The consequences include, but are not limited to:

  • Be asked to pay the balance amount and accrued interest immediately.
  • Lose eligibility to apply Deferments and Forbearances.
  • Not be eligible to receive financial assistance for their studies.
  • Will be reported to credit agencies, which will affect your credit score.
  • Balance costs increase by late payments, interest, costs of collection.
  • Foreclosure of income, social security, and tax refunds.
  • Your employer at the request of the Federal Government may hold a portion of their salary.
  • The Federal Government may take legal action against you.

Alternatives to Prevent Default

  • Pay off loans - You can get a discount on the balance, if you select this option. The Default status will be removed in less time.
  • Payment plan – Contact your Service Agency to make arrangements.
  • Loan Consolidation – This will combine various loans, including defaulted, into one loan. It needs to be processed by the Consolidation Department of Direct Loans, contact 1-800-557-7392 or visit https://studentloans.gov/myDirectLoan/index.action. A loan consolidation will remove the Default status between 60 to 90 working days.
  • Loan Rehabilitation – You need to have at least $500 in balance to become eligible under this alternative. Need to make nine consecutive and satisfactory payments, after making six payments you will be eligible to receive Title IV funds; continue making satisfactory payments to keep eligibility. This alternative will remove the Default status from your credit history.
By selecting one of the previous alternatives, the Default status will be removed as long as you completed it in a satisfactory way. By doing this you will be eligible to receive Title IV funds.

Rights and Responsibilities

By getting a student loan, you will have certain rights. This a brief summary of them:

  • Receive written and verbal information about my rights and responsibilities.
  • Receive a grace period of six months after the first separation from their studies occur.
  • Receive an accounting of all information regarding student loan.
  • Right to obtain a deferment or forbearance period if requested and qualified.
  • Pay off the loan before the repayment period begins, without any penalty.
  • Receive copy of (Note) before or during the period of loan disbursement.
  • Receive documentation certifying the loan balance pay once finished.

As a borrower will have responsibilities both to the institution. This a brief summary of them:

  • Receive an Exit Counseling once the first separation occurs. Also, you can completed at www.studentloans.gov or at your institution.
  • Pay your student loan with interest that accrues and / or capitalized, although not complete my program of study, you are not satisfied with the education or cannot get a job after I graduate.
  • Report to the University and the Agency of any changes in service or academic demographic information that may affect your student loan.
  • Make monthly payments on my loan after parting with the University.
  • Notify the Service Agency if any factor that may affect the period of deferment or forbearance that is.

Additional Information

For additional information about the Direct Loan Program access the links listed or call the Office of Federal Service of the Department of Education. Student Loans The Federal Department of Education can assist you in managing your student loans under the Loan Program. You can visit their website to complete your FAFSA, Master Promissory Note, Entrance Counseling, Exit Counseling; among other things.

Federal Student Aid

Department of Education, which covers all the necessary information about the types of financial assistance.

National Student Loan Data System (NSLDS)

You can verify your history of financial aids (loans and scholarship). Also, find out which agency is managing your loans. If you need a PIN number visit: https://fsaid.ed.gov/npas

Direct Loan (Consolidation)

For orientation and how to work the consolidation and combine loans into one account.

Defaulted Student Loans

For orientation about default, when your after 270 days without making a payment to your student loan: 1-800-621-3115.


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