An education loan is a form of financial aid that must be repaid, with interest. Many students rely on federal government loans to finance their educations.
Loans come in 3 categories...
1. Student (Direct) Loans
William D. Ford Federal Direct Loan Program for Students
Federal Direct Loans are low-interest loans for students to help pay for the cost of a student’s education after high school. The lender is the U.S. Department of Education rather than a bank or credit union.
Students need to complete all the required application materials each academic year. Green River’s academic year runs from Fall through Summer. The federal student loans are subsidized and/or unsubsidized. Subsidized loans are need based and the government pays the interest while the student is attending school at least half-time and during periods of deferment. Unsubsidized loans are not need based, and the student is responsible for interest on unsubsidized loans at all times.
The federal education loans offer fixed interest rates that are typically lower than the variable rates offered by most private student loans. Student loans also provide a variety of deferment options and extended repayment terms. (See: Questions and Answers below)
Direct Loan Q & A
What is a Direct Loan?
Federal Direct Loans help meet today’s cost of higher education. The U.S. Department of Education is the lender. These loans do not require credit checks or collateral, and are not based on a student’s credit history. Student loans provide a variety of deferment options and repayment terms.
For loans first disbursed from July 1, 2013, through June 30, 2014, the interest rate is 3.86% for subsidized and unsubsidized loans. For loans first disbursed from July 1, 2014, through June 30, 2015, the interest rate is 4.66% for subsidized and unsubsidized loans.
In addition to the interest, there is a 1.073% loan fee on all Direct Subsidized Loans and Direct Unsubsidized Loans first disbursed from October 1, 2014, through September 30, 2015; fee example $59.01 on a $5,500 loan. This fee is deducted from each of the gross disbursements prior to sending the net funds to the school. Loans first disbursed prior to October 1, 2014, have different loan fees.
Borrowers of subsidized Stafford Loans first disbursed on or after July 1, 2014, are eligible for an interest subsidy during the six-month grace period. The subsidy during the grace period had been temporarily removed for loans first disbursed on or after July 1, 2012, and before July 1, 2014.
Students must be enrolled at least half-time (6 credits) in an eligible program, taking classes required for that program, and meeting the academic progress policy.
Who are my lender and loan servicer?
There is no need to select a lender, as the U.S. Department of Education is the lender for Direct Loans.
Visit My Federal Student Aid to view information about all of the federal student loans you have received and to find contact information for the loan servicer for your loans. You will need your Federal Student Aid PIN to access your information.
How much can I borrow?
Direct loans have annual maximum loan amounts based on grade level, dependency status, your overall financial aid eligibility and other aid awarded. You must have earned 45 credits towards your program of study to be considered a second year student. Since the total of your aid cannot exceed your applicable Green River budget, you may not be eligible for the maximum loan amount.
How do I apply?
Since Direct Loans are considered part of the Federal Financial Aid Programs, each academic year students must complete the following before student loan applications are approved and sent to the servicer.
STEP 1: Complete all required application materials
- FAFSA (Free Application for Federal Student Aid) for the applicable academic year
- Supplemental Financial Aid Application for the applicable academic year
- Federal Direct Loan Worksheet
- You may be required to provide other documents if your file is selected for verification
STEP 2: NEW student borrowers at Green River must complete Direct Loan Entrance Counseling and a Direct Loan Master Promissory Note online before the loan request will be processed. You will need your FAFSA Pin to complete these.
- Go to www.StudentLoans.gov
- Select “Sign In” under Manage My Direct Loan
- Select “Complete Entrance Counseling” (twice) - Select “I am an undergraduate student” and follow the prompts
- Select “Complete Master Promissory Note” - Select “Subsidized/Unsubsidized” and follow the prompts.
If you have “need-based” eligibility, and requested student loans on your FAFSA and the Green River Supplemental Financial Aid Application, we will automatically calculate your “need-based” loan eligibility. However, if you do not have “need-based” eligibility, you must fill out Green River’s Federal Direct Loan Worksheet for an unsubsidized loan. On the worksheet you will provide information and the amount you’d like to borrow for the academic year. After your file has been reviewed, a confirmation will be sent to you showing the loan amounts approved for each quarter and the estimated disbursement dates. Please remember these are only “estimated” disbursement dates.
When will I get my loan funds?
The college cannot forward the loan application to the U.S. Department of Education until after the student has electronically signed the Master Promissory Note(MPN) and completed the Direct Loan Entrance Counseling. (See “How do I Apply?”)
Direct Loans are always issued in multiple disbursements, and disbursements are NOT available prior to the first day of the quarter.
If your loan is for two, three, or four quarters, it will be divided equally among the quarters.
Green River will receive your loan funds electronically. We will apply the funds to your tuition and fees, if there is a balance owing. We will provide you any remaining loan funds to you via the method you choose using your HigherOne Gator Choice Card.
Your loan funds are to be used for educational expenses that may include your tuition and fees, room and board, books, computer purchase, miscellaneous living expenses, gas for your car or bus tickets and child care costs.
How do I maintain my subsidized loan eligibility as a new borrower after July 1, 2013?
What is a subsidized Federal Direct Loan?
“Subsidized” loans refer to need-based loans from the Federal Government for which the government pays the interest (subsidizes) while a student is in school and during certain eligible deferment periods.
What will change?
New TIME LIMITATIONS apply to new Federal Direct Loan borrowers (no outstanding balance on a previous federal loan) starting 7/1/13.
The timeframe referred to for subsidized loans applies only to periods when you use subsidized loans. It is not the same as the limit on overall financial aid eligibility. When offering loans to students, the college always has to give subsidized loans to students who qualify before providing unsubsidized loans.
Your maximum time limit for subsidized loans is measured in academic years and is based upon the length of your program of study. You can receive subsidized loans for 150% of your “program time.” For example, a two-year associate degree (90 credits) would allow subsidized loans for three academic years. If you change programs, the previous subsidized loans will count against the time period allowed for the new program.
If you enroll less than full-time or don’t attend all three quarters, your timeframe will be pro-rated UNLESS you borrow the annual maximum for the year. So, if you borrow the maximum annual loan and only attend part of the year and/or enroll part-time, you will have used the equivalent of three full quarters of subsidized loan eligibility even though you didn’t attend the full year or were part-time. An academic year at Green River is normally fall, winter and spring but can also include the “trailing” summer.
What happens when I don’t finish my program in the 150% timeframe allowed by the Financial Aid Office for any aid (whether I use loans or not)?
If students do not complete their programs of study within the 150% timeframe, they are NO LONGER ELIGIBLE FOR SUBSIDIZED LOANS. If you transfer to a shorter program, you will no longer qualify for the interest subsidy. The government will stop paying your interest subsidy on your previous loans at the end of the 150% financial aid timeframe. You become responsible for all interest thereafter.
If you lose your interest subsidy, you cannot regain it on former loans at a later date.
How do I keep my interest subsidy for Federal Direct Loans?
You can keep your interest subsidy by completing your program within the overall financial aid 150% timeline.
If you did not graduate and transfer to a longer program (such as a university) you will still remain eligible for your interest subsidy on previous loans.
If you stop attending before the 150% timeframe, you will keep your interest subsidy.
If you lost your loan subsidy on prior loans, you will have subsidized eligibility on NEW LOANS if you enroll in a longer program at a university.
How does the government track my subsidized loan eligibility?
Colleges will be reporting program length, enrollment status and graduation for all borrowers.
Therefore, it will be very important to finish your program within the 150% timeframe AND apply for graduation to show completion. Your successful completion will save you money!
What are my rights and responsibilities?
- So that your future monthly payments don't become a burden, you should estimate how much you need and what your loan payments would be.
- The terms of your loan are described in the promissory note - read them carefully so you understand your obligation to repay the loan according to the terms of the note.
- Let your lender and the Financial Aid Office know if you change your address, name, telephone number, enrollment status, or school.
- Communicate with your lender or the agency holding the loan if you are having trouble making payments - you may be able to temporarily postpone or reduce your payments.
- Keep your promissory note, loan disclosure statement and repayment schedule to refer to the interest rate, how much you borrowed and the terms of your loan.
- Your loan will have a grace period, usually six months, when you don't have to make principal payments. The grace period starts after you withdraw from school, drop to less than half-time, or graduate and don't continue college.
- Begin making payments at the end of your six month grace period - contact your lender if you haven't received a repayment schedule.
- A student loan in "default" can damage your credit record - be sure to make timely monthly payments.
- Your lender must give you at least five years to repay your loan as long as you meet the minimum monthly payment.
- In addition to a flat monthly payment option, you may choose an income-sensitive or graduated repayment schedule to make lower monthly payments initially and increase them as your income increases.
- You may prepay part or all of your loan without penalty.
- You must be notified if your lender sells or transfers your loan and be provided with the new loan servicer contact information.
- The only circumstance to exempt you from repaying your loan is permanent and total disability.
How do I find more information about Federal Direct Loans, how to calculate repayments and manage my own loan repayment?
The U.S. Department of Education provides tools and information to manage your student loans.
Could I defer or postpone my payments?
If you can't make your student loan payments because of a temporary financial hardship, you may be eligible for a deferment. A deferment allows you to temporarily postpone your monthly payments. If you have a subsidized Stafford Loan, the federal government will pay the interest for you during a period of deferment. For other loans, interest will accrue during deferments.
Deferments for Stafford Loans (taken out after July 1, 1993) include:
- Unemployment (3 year limit)
- At least half-time enrollment at an eligible school
- Participation in an approved rehabilitation program
- Study under an approved graduate fellowship program
- Economic hardship as defined by the U.S. Department of Education (3 year limit)
- Active duty military (does not include all military personnel)
If you are experiencing financial hardship and/or illness, but do not qualify for a deferment, your lender may be willing to grant a forbearance during which time you are responsible for the interest that accrues on your loan.
2. Federal Direct Parent (PLUS) Loans
The Parent Loan for Undergraduate Students (PLUS) may be obtained by parents to cover costs not already covered by their student’s financial aid package, up to the full cost of attendance full cost of attendance.
The U.S. Department of Education is the lender for Federal Direct PLUS Loans.
Parent (PLUS) Loan Q & A
How much can I borrow?
There are no set limits for Direct PLUS Loans. The parent may not borrow more than the cost of the student’s education less any other financial aid received. The parent requests an amount on the Green River Direct PLUS Loan for Parents Worksheet and the Financial Aid Office will determine the actual amount that may be borrowed.
The Department of Education makes the PLUS loan credit decision after a review of the parent’s credit report.
The parent and the student must both be U.S. citizens or eligible noncitizens, must not be in default on any federal education loans or owe an overpayment on a federal education grant, and must meet other general eligibility requirements.
The student must be a dependent student who is enrolled at least half-time (6 credits) at a school that participates in the Direct Loan Program. Generally, the student is considered dependent if he or she is under 24 years of age, has no dependents, and is not married, a veteran, or a ward of the court.
How does a parent apply for a Parent PLUS Loan?
STEP 1: The following application materials must be completed.
- 2014-2015 Free Application for Federal Student Aid (FAFSA), for the applicable academic year, to be completed by dependent student and parent.
- 2014-2015 Direct PLUS Loan for Parents Worksheet to be completed by the parent.
- If the student wants a Federal Direct Loan, the student should complete the Federal Direct Loan Worksheet and submit it to the Financial Aid Office before or with the PLUS Loan for Parents Worksheet.
STEP 2: Parent must complete the electronic Direct PLUS Master Promissory Note (MPN) online at: www.studentloans.gov.
Select: Complete New MPN for Parent PLUS Loans
What is the interest rate for a Direct PLUS Loan?
The interest rate for Direct PLUS Loans is a fixed rate of 6.41%.
Interest is charged on Direct PLUS Loans beginning the date of your loan’s first disbursement. For more information on the interest rates for Direct PLUS Loans, contact the Direct Loan Servicing Center by phone at 1-800-848-0979.
Are there any fees for a Direct PLUS Loan?
In addition to the interest, there is a loan origination fee of 4% of the principal amount of each Direct PLUS Loan that you receive. The loan origination fee is 4.288 % if the first disbursement is made on or after December 1, 2013. This fee is deducted from each of the gross disbursements prior to sending the net funds to the school.
How will I receive my PLUS loan funds?
Funds received by Green River would first be applied to the student’s account to pay off any remaining tuition and fees owed by the student. Any remaining balance would be ordered payable to the student or to the parent, depending on the selection made by the parent on the Direct PLUS for Parents Worksheet.
If the student is receiving the remainder of the PLUS funds, the student will receive the funds via the method they choose using the HigherOne Gator Coice Card.
Entrance counseling is not required for a student to receive Parent PLUS Loan funds.
The proceeds of the PLUS loan must be used for authorized educational expenses for the student. Any PLUS loan proceeds received must be repaid for any period that the student is not attending classes taking a minimum of six eligible credits.
Can I transfer a Direct PLUS Loan to my child so that it becomes my child’s responsibility?
A Direct PLUS Loan made to a parent CANNOT be transferred to a student. The parent borrower maintains responsibility for repaying a Direct PLUS Loan.
When do I begin repaying my PLUS Loan?
Repayment of a Direct PLUS Loan begins 60 days after the full amount you’ve borrowed for an academic year has been disbursed. This means you would generally begin repayment while the student is still in school. If the Direct PLUS Loans had a first disbursement date on or after July 1, 2008, you may request that repayment be delayed until six (6) months after the student graduates or is no longer enrolled at least half-time
For more information about postponing payments, contact the Direct Loan Servicing Center or visit Direct Loans on the web at www.direct.ed.gov.
What will my payments be?
For more information about Parent PLUS Loans and estimating the monthly payment, how capitalizing interest affects repayment, and loan relief, visit the Direct Loan website at www.direct.ed.gov.
3. Private Education Loans
Private Education Loans, also known as Alternative Education Loans, help bridge the gap between the actual cost of your education and the amount the government may allow you to borrow in its programs. Private loans are offered by private lenders and no federal forms are required. Terms may vary from lender to lender.
For private education loans students must meet the lender’s credit criteria. Creditworthy cosigners may help you qualify for a lower interest rate.
Private education loans tend to have variable interest rates and often cost more than the Federal Direct Loans that have a fixed rate. Private education loans may be less expensive than credit card debt, so it is important to check the rates of each before making a decision.
Though not required, it is strongly recommended students first seek financial aid which may include grants, work study, and Federal Direct Loans that carry low fixed rates, prior to considering private loans. This is done by completing a FAFSA and Green River’s Supplemental Financial Aid Application and any additional required documents. Federal Direct Loans offer better repayment options, deferments, forbearance, and some forgiveness options. There are no credit requirements for Federal Direct Loans for students. You should exhaust your eligibility for Federal Direct Loans before resorting to private student loans.
If the student’s total cost of attendance has already been met by grants, scholarships, work study, Federal Direct Loans, and/or other aid, the student will not qualify for a private loan.
Private Education Loan Q & A
How much can I borrow?
The total amount from scholarships, grants, work study, federal loans, and private education loans may not exceed the total cost of education.
How do I apply for a private loan?
Step 1: Contact a lender to receive a pre-approval for a Private Education Loan
Step 2: Complete the following Green River application materials:
What is the Private Education Loan Applicant Self-Certification form?
When your file is reviewed for a private alternative education loan, the staff reviewing your file will send you the Private Education Loan Applicant Self-Certification.
The reviewer will enter your name, SSN and complete Section 2. Section 2 includes three items for the period of the loan:
- Cost of education
- Estimated other financial assistance
- Difference between A and B
If the answer for C is an amount, you will receive a notice that confirms your estimated disbursement dates and amounts.
You, as the applicant, must complete Section 3 of the form and provide the form to your private loan lender. Your lender will not make the first disbursement on your private loan until they have received the completed Private Education Loan Applicant Self-Certification. (Effective 02/14/2010)
If the answer for C is zero, it means you’re cost of education has been met by the loan, and you have no remaining eligibility. You will receive the form with a letter advising you are not eligible for the private loan.
Is there a credit check?
The lender will make the decision to deny or provide a pre-approval based on your credit score, and the credit score of your cosigner.
Do I need a cosigner?
If is better to apply for a private student loan with a cosigner even if you could qualify for the loan on your own. Just applying with a cosigner usually results in a slightly lower rate as a cosigner reduces the lender’s risk. Your interest rates and fees may be based on the higher of the two credit scores. If your cosigner has a much better credit score than you, it could result in a much lower interest rate.
What is the interest rate?
Private student loans rates and fees vary based on your credit score and on your cosigner’s credit score.
Private education loans typically have variable interest rates, with the interest rate tied to an index, such as LIBOR or PRIME plus a margin. The LIBOR index is the London Inter Bank Offered Rate and represents what it costs a lender to borrow money. The PRIME Lending rate is the interest rate lenders offer to their most creditworthy customers. At rate of LIBOR + 2.8% is roughly the same as PRIME + 0%. If all else is equal, and your rate is tied to the LIBOR index, it will increase more slowly than a rate that is pegged to the PRIME index.
Parents who are considering an alternative education loan may want to consider the Federal Direct PLUS loan for parents, or a home equity loan. There are several tradeoffs between these options.