FVCC will be processing loans through the Direct Loan program. 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 US Department of Education rather than a bank or other financial institution. The interest rate for the Federal Direct Subsidized Loan and Unsubsidized Loan is a projected fixed 4.66% for loans disbursed after July 1, 2014. The annual loan limits are $3500 for a Freshman (a student that has earned less than 30 credits) and $4500 for a Sophomore (a student that has earned 30 or more credits). The standard loan repayment is 10 years, however, other repayment plans may be available. Contact your servicer for more information. All Direct loans have a 6-month grace period. This means you will have six months from the time you graduate or stop attending school at least half-time (6 credits) before you have to start making your student loan payment.
Steps to Receiving a Loan
There are three steps to receiving a Direct student loan at FVCC.
- Return your acceptance form indicating how much of your student loan you would like to receive.
- For new students, federal regulations require that you attend Entrance Counseling. During this session you will learn more information regarding your rights and responsibilities of taking out a student loan.
- Students will also be required to complete a financial literacy course and you must complete your Direct Loan MPN (Master Promissory Note). The MPN is a legally binding agreement to repay your loan to the Department of Education. In most cases, one MPN can be used for loans that you receive over several years of study.
Once you return your acceptance form to the financial aid office indicating that you would like to take out a student loan, you will receive more detailed information on how to complete the Entrance Counseling and the Direct Loan Master Promissory Note.
Eligibility is based on financial need as determined from information provided on the Free Application for Federal Student Aid (FAFSA). The projected fixed 4.66% interest (for loans disbursed after 7/1/14) is paid by the federal government:
- While students are in school at least half-time
- During an approved deferment period
Unsubsidized Direct loans are not based on financial need. Eligibility is open to any qualified student. The interest rate is projected to be fixed at 4.66%.
Unlike the Subsidized Direct loan, interest is the borrower’s responsibility on Unsubsidized loans, and begins to accrue as soon as the first disbursement is made. For that reason, borrowers are encouraged to make interest payments while in school. Dependent students may be eligible for an additional $2000 in Unsubsidized loans. Independent students may be eligible for an additional $6000 in unsubsidized student loans.
Cumulative Aggregate Loan Limits
Besides annual loan limits based on grade level, students also have cumulative loan limits. As a Dependent Undergraduate student the limit is $31,000 (maximum $23,000 subsidized). As an Independent Undergraduate student the limit is $57,500 (maximum $23,000 subsidized).
For loans disbursed now there is a 1.072% origination fee. The projected origination fee after September 30, 2014 is 1.073%. The origination fee is a percentage of the principal amount of each Direct loan that you receive. The fee is deducted before you receive any of the loan funds.
A deferment or forbearance is a postponement of payments for a specific period of time. Deferments are an entitlement of the Federal Student Loan Program and if you meet eligibility requirements, a deferment will be granted. Common types of deferments are in-school deferment, unemployment deferment, and economic hardship deferment. Forbearances are granted at the discretion of the loan holder/servicer. Interest continues to accrue during both deferments and forbearances for Unsubsidized loans. For Subsidized loans, interest continues to accrue during forbearances.
Consolidation through the Direct Student Loan Program is another repayment option, especially when a student has loans with multiple lenders. The interest rate is a fixed rate based on the weighted average of the student’s current loans rounded to the nearest 1/8 of 1 percent. The maximum rate is 8.25%. Before consolidation check with your current servicer to determine if you have any repayment benefits. Consolidation is not the best option for every student. Please evaluate this option carefully before consolidating your loans.
Loan Servicers Contact Information
Fed Loan Servicing (PHEAA): 800-699-2908
Great Lakes: 800-236-4300
Sallie Mae: 800-722-1300
Federal Parent Loan for Undergraduate Students (PLUS)
The PLUS loan is a loan that parents can apply for to assist with covering the Cost of Attendance. This loan is specifically for parents of undergraduate “dependent” students. A parent can borrow the Cost of Attendance minus the student’s total financial aid package. A credit check will be performed on the parent that wished to take out the PLUS loan. The parent must have a positive credit rating to be approved for the PLUS loan (if the PLUS loan is denied, then the student has access to an additional Unsubsidized Loan). For loans disbursed on or after July 1, 2010 the interest rate is 7.9%. There is a 4% default and origination fee deducted from the disbursement. This loan is not automatically awarded. If a student is interested in being packaged with a PLUS loan, they should contact the financial aid office at FVCC directly to start the process.