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WHILE ATTENDING COLLEGE
LOAN ENTRANCE COUNSELING
FFEL Loan Borrowers
For FFEL loan entrance counseling, please contact your loan provider for more information. Don't know who your lender is? Use the NSLDS to find out.
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Direct Loan Borrowers
Direct Loans are made to students attending school at least half time.
The U.S. Department of Education is the lender, and you receive the
loan money through your school. You may receive a Direct Subsidized
Loan, a Direct Unsubsidized Loan, or both for the same academic year. A
student qualifies for a Direct Subsidized Loan based on financial need,
as determined under federal regulations. A student's need is not a
factor in determining eligibility for a Direct Unsubsidized Loan.
Most of the provisions below apply to both the FFEL and Direct Loan programs.
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Borrow Only What You Need
When your school determined your federal financial aid award, it used a standard budget to estimate the expenses you would incur while attending school. This expense estimate is referred to as your cost of attendance (COA). If you can reduce your expenses to an amount less than the school's estimated COA, you might not need to borrow as much as the school has awarded.
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Interest Rates
The interest rate for both Subsidized and Unsubsidized Loans made before July 1, 2006 is variable and is adjusted each year on July 1. Loans made on or after July I, 2006 are fixed at 6.8 percent. The interest on a Subsidized Loan is paid by the federal government while you are enrolled in school at least half time, or during grace or deferment periods. If you have a Direct Unsubsidized Loan, you are responsible for the interest from the day the loan is paid to you until you pay off the loan.
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Loan Origination Fee
The loan origination fee is another expense of borrowing a loan. The fee charged for Subsidized and Unsubsidized Loans was 4 percent of the amount borrowed before July 1, 2006. Beginning with loans for which the first disbursement of principal is made on or after February 8, 2006, and before July 1, 2007, the origination fee charged to Direct Stafford Loan borrowers is 3 percent. The loan fee is subtracted proportionately from each loan disbursement.
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Promissory Note
Before you receive your loan funds, you must sign a promissory note. In past years, borrowers completed a separate promissory note for each new loan borrowed. Now, if you attend a four-year school or graduate school, in most cases, you will sign only one promissory note that will be used for all of your loans at a single school. This new note is called a Master Promissory Note (MPN) . Direct Loan borrowers can now complete the promissory note online. FFEL borrowers should contact their private lender for promissory note guidance.
When you sign the Master Promissory Note, you are confirming your understanding that your school may make new loans for you for the duration of your education (up to 10 years) without having you sign another promissory note. You are also agreeing to repay your lender, the U.S. Department of Education, all loans made to you under the terms of the MPN. Therefore, it is very important that you completely read and understand all of the information on the MPN before you sign it.
You are not required to accept the amount that your school awards you. You should notify your school if you want to borrow a lower amount than the school has awarded you.
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School Notification
Your school must notify you in writing or electronically whenever it makes a loan disbursement. The notice must tell you the date and the amount of the loan disbursement, which loan funds are subsidized and which are unsubsidized, information about your right to cancel all or a portion of the loan, including the current loan disbursement, and procedures for canceling the loan.
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