Federal Student Loans
The Federal Direct Student Loan program enables students to borrow funds to assist with educational expenses. Direct Student Loans carry a fixed interest rate of 4.29% (see below). A 1.068% origination fee is deducted from the proceeds of the loan upon disbursement. Interest rates and origination fees are established on an annual basis by congressional legistlation. Students are required to begin repayment on the loan 6 months after they graduate or are no longer enrolled at least half-time.
All first-time Direct Loan student borrowers will be required to sign a Master Promissory Note (MPN). The MPN is a legal document in which you promise to repay your loan(s) and any accrued interest and fees to the U.S. Department of Education. The MPN will also explain the terms and conditions of the loan, which we advise you read and understand prior to signing.
If you haven't previously received a Federal Stafford Loan or Federal Direct Loan, you must complete Entrance Counseling before the first disbursement of your loan can be made to Elizabethtown College. This helps you understand your rights and responsibilities regarding your loan.
You will receive instructions from the Financial Aid Office via mail on the steps you will need to complete the Direct Loan MPN. You will also receive instructions on completing Entrance Counseling if you are required to do so. If you have any questions please do not hesitate to contact our office.
Subsidized and Unsubsidized Explained
There are two types of Direct Loans: Subsidized Direct Loans and Unsubsidized Direct Loans. With subsidized loans, interest does not accrue on the loan until the student graduates or leaves the school for any reason. With unsubsidized loans, interest accrues on the loan upon disbursement and should be paid upon while in school. However, no principal payments are due until the loan enters official repayment (6 months after graduating or leaving school).
When looking at loan financing options, students should always start with the Federal Direct Loan program. The Direct Loan Program is the federal government's main loan program and accounts for more financial aid dollars in our nation than any other source. Maximum annual loan limits are determined by the federal government and apply to all colleges equally. These limits for dependent students are listed below:
First-Year: $3,500 and $2,000 additional unsubsidized
Sophomore: $4,500 and $2,000 additional unsubsidized
Junior: $5,500 and $2,000 additional unsubsidized
Senior: $5,500 and $2,000 additional unsubsidized
Dependent students may borrow a maximum of $31,000 through the Direct Loan program towards their undergraduate degree (no more than $23,000 of which can be subsidized). Graduate students are considered independent by the federal government. The graduate loan limit per year is $20,500.
Loan Qualification Formula
The type of Direct Loan a student qualifies to receive is governed by a federal formula that takes into account the student's financial need and the cost of the college they are attending. It is very possible for a student to receive a subsidized Loan at one school and an Unsubsidized Loan at another school. The formula a school must adhere to looks like this:
Cost of Education – Expected Family Contribution – Other Financial Aid = Maximum Subsidized Loan
Student Loan Interest Rates, Disbursement and Repayment
Interest Rates for both the subsidized and the unsubsidized Direct Student Loans are fixed at 4.29% for the life of the loan.
Half of the Direct Loan is disbursed in the fall with the other half in the spring. There is a standard repayment period of 10 years with a $50 per month minimum payment. Interest paid on a Direct Loan MAY qualify as a student loan interest deduction on a student's federal tax return. For students who borrow the annual maximum Federal Direct Loan each year and graduate in four years, their cumulative Direct/Stafford Loan borrowing will equal $27,000.
For more information regarding loan amounts and repayment obligations, along with information regarding deferments, forbearances, and consolidation, student are encouraged to visit www.studentloans.gov .
Every student who receives Federal Loans are required to complete Exit Counseling upon their graduation or when they leave school. This is a mandatory federal requirement. For more information on this, visit the Department of Education's Exit Counseling Guide.If you have any questions or concerns regarding the Direct Loan Program or process, please contact the our office for assistance.