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Entrance Counseling Guide For Direct Loan Borrowers: WWW - Dl.ed - Gov
Entrance Counseling Guide For Direct Loan Borrowers: WWW - Dl.ed - Gov
You are borrowing Direct Subsidized Loans Master Promissory Note for Direct • Do not enroll at the school that
and/or Direct Unsubsidized Loans to help you Subsidized Loans and Direct determined you were eligible to receive
finance your education. Repaying these Unsubsidized Loans the loan;
loans is a serious responsibility. This guide • Stop attending school or drop below
explains some of the most important Direct Subsidized Loans and Direct
half-time enrollment;
information that you will need to successfully Unsubsidized Loans are made to students to • Transfer from one school to another
understand, manage, and repay your loans. help pay for the cost of education beyond
school; or
high school. In most cases, the loans you
Throughout this guide, the words “we,” “us,” • Graduate.
received were made under a Master
and “our” refer to the U.S. Department of Promissory Note (MPN). The MPN is a Money Management
Education. The word “loan” refers to one or legally binding agreement between you and
more Direct Subsidized Loans or Direct us and contains the terms and conditions of Many students start college with little or no
Unsubsidized Loans that you are borrowing. your loans. personal experience with loans, credit cards,
living expenses, and budgeting.
The William D. Ford Federal Direct Loan Under an MPN, you may receive more than Understanding and practicing effective
Program one loan over a period of up to 10 years to money management will help you to
pay for your educational costs, as long as the determine how much money you actually
The William D. Ford Federal Direct Loan school you are attending is authorized to
(Direct Loan) Program includes the following need to borrow. The following tips will help
make multiple loans under the MPN and you manage your money and keep your debt
types of loans:
chooses to do so. under control.
• Federal Direct Stafford/Ford Loans If the school you are attending is not
(Direct Subsidized Loans) (1) Know your rights and responsibilities.
authorized or chooses not to make multiple
• Federal Direct Unsubsidized loans under the MPN, or if you do not want to Failing to take advantage of your rights (for
Stafford/Ford Loans (Direct receive more than one loan under the MPN, example, applying for a deferment or
Unsubsidized Loans) you must sign a new MPN for each loan that forbearance) and to carry out your
• Federal Direct PLUS Loans (Direct you receive. If you do not want to receive responsibilities (keeping the Direct Loan
PLUS Loans) more than one loan under the MPN, you must Servicing Center informed of your address,
• Federal Direct Consolidation Loans notify the school you are attending or the phone number, and other information) is a
(Direct Consolidation Loans) Direct Loan Servicing Center in writing. sure way to end up delinquent or in default.
Keep a complete set of all your records, and
Loans made under the Direct Loan Program Use of your loan money talk to the Direct Loan Servicing Center when
are known collectively as “Direct Loans.” you have questions or concerns.
You may use the loan money you receive
Direct Loans are made by the U.S.
only to pay for your authorized educational (2) Take advantage of tax relief.
Department of Education.
expenses for attendance at the school that The Taxpayer Relief Act of 1997 created tax
Who to Contact About Your Direct Loans determined you were eligible to receive the credits (the HOPE Scholarship Credit and the
loan. Authorized expenses include the Lifetime Learning Credit) for individuals
Our Direct Loan Servicing Center services, following:
answers questions about, and processes paying tuition and related expenses. Contact
• Tuition, the IRS for more information.
payments on Direct Loans. You may contact
the Direct Loan Servicing Center by: • Room, (3) Understand and limit credit card use.
• Board, Credit cards are one form of borrowing
• Calling 800-848-0979 or, if you use a • Institutional fees,
telecommunications device for the deaf money. If you decide you need a credit card,
• Books, stick with one card with a low limit. Multiple
(TDD), by calling 800-848-0983;
• Supplies, cards mean higher debt. Pay off your total
• Visiting the Direct Loan Servicing • Equipment, balance each month. If that is not possible,
Center's web site at www.dl.ed.gov; or • Dependent child care expenses, always pay more than the minimum. Many
• Writing to: • Transportation, credit card offers entice you with a low
U.S. Department of Education • Commuting expenses, interest rate for the first few months and raise
Direct Loan Servicing Center • Rental or purchase of a personal, the rate after this initial period. If you make a
P.O. Box 4609 computer, payment late (even a day late!), they may
Utica, NY 13504-4609. • Loan fees, and increase your interest rate.
Where You Can Find Your Direct Loan • Other documented, authorized costs. (4) Pay interest on Direct Unsubsidized
Records Information you must report to us after Loans.
Direct Loans are reported to the National you receive your loan If you borrow a Direct Unsubsidized Loan,
Student Loan Data System (NSLDS). you are responsible for paying all of the
You must notify the Direct Loan Servicing interest that accumulates on the loan. You
NSLDS is our central database for student Center and/or the financial aid office at your
aid records. It provides a centralized view of do not have to pay the interest while you are
school about certain changes. in school. But if you start to pay the interest
your loans, tracking your loans from when
they are approved through when they are Until you graduate or otherwise leave school, while you are in school, it may save you a
paid off. You may access your account on you must notify your school’s financial aid significant amount of money over the life of
the NSLDS web site at www.nslds.ed.gov by office if you: your loan because the interest that you pay
using a Personal Identification Number (PIN) while you are in school will not be capitalized.
that w e assign to you along with other • Change your local address, permanent Start by making your interest payments a
identifying data. If you do not have Internet address, or telephone number; budget priority. Remember that paying a little
access, you may call 800-4-FED-AID (800- • Change your name (for example, more each month can save you many dollars
433-3243). maiden name to married name); later.
• Do not enroll at least half-time for the
A common theme run through these money
loan period certified by the school;
management tips: Develop a budget.
Developing a budget after you leave school is
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Direct Loan Servicing Center: 800-848-0979 ~ www.dl.ed.gov
Entrance Counseling Guide for Direct Loan Borrowers
a very important tool. The three main steps Independent Undergraduates school at least half -time, during your grace
in creating your budget are: (1) calculating period, and during deferment and
your total resources; (2) calculating your total First Year $6,625 forbearance periods, we will capitalize your
expenses; and (3) determining the balance. (freshman) (maximum $2,625 interest.
subsidized)
The Interactive Budget Worksheet and Capitalization increases the unpaid principal
Calculator at www.ed.gov/DirectLoan will help Second Year $7,500 balance of your loan, and we will then charge
you determine your total expenses and (sophomore) (maximum $3,500 interest on the increased principal amount.
estimate your total available income. The subsidized)
budget calculator lists most of the critical The chart below shows the difference in the
total amount you would repay on a $15,000
items to help you consider all of your
Third Year (junior) $10,500 Direct Unsubsidized Loan if you pay the
resources. Based on the figures entered, an and Beyond (maximum $5,500
estimated budget figure will be calculated for interest as it is charged during a 12-month
subsidized) deferment or forbearance period, compared
the year.
to the amount you would repay if you do not
Amount you may borrow Graduate and Professional Students pay the interest and it is capitalized.
$18,500
The charts on this page show the maximum If you pay If you do not
(maximum $8,500 subsidized)
amounts of Direct Subsidized Loans and the pay the
Direct Unsubsidized Loans that you may interest as interest and
borrow for a single academic year (annual Aggregate Loan Limits for Direct it is it is
loan limits), and the maximum amounts that Subsidized and Direct Unsubsidized charged… capitalized…
you may borrow in total for undergraduate Loans:
and graduate study (aggregate loan limits). Loan $15,000 $15,000
Dependent Undergraduates Amount
These amounts vary depending on your
academic level and dependency status. If $23,000 $0 $1,238
Capitalized
you are enrolled in certain health professions
Independent Undergraduates Interest for
programs, y ou may qualify for higher annual
12 months
and aggregate limits on Direct Unsubsidized
Loans. $46,000 (at the
(maximum $23,000 subsidized) maximum
If your school awards both Direct Subsidized rate of
Loans and Direct Unsubsidized Loans, it is Graduate and Professional Students 8.25%)
required to determine your eligibility for a $138,500 Principal to $15,000 $16,238
Direct Subsidized Loan before determining (includes loans received for undergraduate
your eligibility for a Direct Unsubsidized Loan. be Repaid
study; maximum $65,500 subsidized)
The actual loan amount that you receive will Monthly $184 $199
be determined by your school, based on your Payment
academic level, dependency status, and Interest Rate
(Standard
other factors such as: Repayment
The interest rate on Direct Subsidized Loans
• The length of the program or the and Direct Unsubsidized Loans is a variable Plan)
remaining portion of the program in rate that is based on a formula established by
Number of 120 120
which you are enrolled, if it is less than a law. The interest rate may be adjusted each
year on July 1. As a result, your interest rate Payments
full academic year;
may change annually, but it will never exceed
• Your cost of attendance; Total $23,315 $23,900
8.25 percent. We will notify you annually of Amount
• Your Expected Family Contribution; the actual interest rate for each loan that you Repaid
• Other financial aid you receive; and receive.
• Your remaining eligibility under the Payment of Interest
annual or aggregate loan limits. In this example, you would pay $15 less per
We do not charge interest on a Direct month and $585 less altogether if you pay the
The actual amount you receive may be less Subsidized Loan while you are enrolled in interest as it is charged during a 12-month
than the maximum annual amounts shown in school at least half -time, during your grace deferment or forbearance period.
the charts. period, and during deferment periods. We You may be able to claim a federal income
Annual Loan Limits for Direct Subsidized charge interest on a Direct Subsidized Loan tax deduction for interest payments you make
Loans and Direct Unsubsidized Loans: during all other periods (starting on the day on Direct Loans. For further information,
after your grace period ends), including refer to IRS Publication 970, which is
Dependent Undergraduates forbearance periods. available at www.irs.ustreas.gov .
First Year $2,625 We charge interest on a Direct Unsubsidized Loan fee
(freshman) Loan during all periods (starting on the day
your loan is paid out). This includes periods We charge a loan fee of up to 4 percent of
Second Year $3,500 while you are enrolled in school at least half - the principal amount of each loan you
(sophomore) time, during your grace period, and during receive. This fee will be subtracted
deferment and forbearance periods. proportionally from each disbursement of
your loan. The loan fee will be shown on a
Third Year (junior) $5,500 If you do not pay the interest on a Direct disclosure statement that we send to you.
and Beyond Subsidized Loan during forbearance periods,
we will add it to the unpaid principal amount Disbursement (how your loan money will
of your loan. This is called “capitalization.” be paid out)
If you do not pay the interest on a Direct Generally, your school will disburse (pay out)
Unsubsidized Loan while you are enrolled in your loan money in more than one
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Direct Loan Servicing Center: 800-848-0979 ~ www.dl.ed.gov
Entrance Counseling Guide for Direct Loan Borrowers
installment, usually at the beginning of each timeframe. If you received an up-front consequences of default. Late fees may be
academic term (for example, at the beginning interest rebate on your loan, the rebate added if your payments are late, and your
of each semester or quarter). If your school does not apply to the part of your loan delinquency will be reported to one or more
does not use academic terms, it will generally that you tell your school to cancel. Your national credit bureaus.
disburse your loan in at least two loan will be adjusted to eliminate any
Default occurs when you become 270 days
installments, one at the beginning of the interest, loan fee, and rebate amount
period of study for which you are receiving that applies to the amount of the loan delinquent in making payments on your
loans. If you default:
the loan, and one at the midpoint of that that was cancelled.
period of study. • The entire unpaid amount of your loan
If you ask your school to cancel all or
becomes due and payable.
In most cases, if the Direct Subsidized Loan part of your loan outside the timeframes
or Direct Unsubsidized Loan that you are described above, your school may • We will report your default to national
receiving is your first student loan under process your cancellation request, but it credit bureaus.
either the Direct Loan Program or the Federal is not required to do so. • We may sue you, take all or part of your
Family Education Loan (FFEL) Program, you • Within 120 days of the date your school federal tax refund or other federal
must complete entrance counseling before disbursed your loan money (by crediting payments, and/or garnish your wages so
your school can make the first disbursement the loan money to your account at the that your employer is required to send
of your loan. school, by paying it directly to you, or us part of your salary to pay off your
both), you may return all or part of your loan.
Your school may disburse your loan money
by crediting it to your account at the school, loan to us. Contact the Direct Loan • We will require you to pay reasonable
or may give some or all of it to you directly by Servicing Center for guidance on how collection fees and costs, plus court
check or other means. The Direct Loan and where to return your loan money. costs and attorney fees .
Servicing Center will notify you in writing each You do not have to pay interest or the • You will lose eligibility for other federal
time your school disburses part of your loan loan fee on the part of your loan that you student aid and assistance under most
money. return within 120 days of the date that federal benefit programs.
part of your loan is disbursed. If you
If your school credits your loan money to your received an up-front interest rebate on • You will lose eligibility for loan
account and the amount credited is more your loan, the rebate does not apply to deferments.
than the amount of your tuition and fees, the part of your loan that you return. Grace Period
room and board, and other authorized Your loan will be adjusted to eliminate
charges, the excess amount is called a credit any interest, loan fee, and rebate You will receive a six-month grace period on
balance. Unless you authorize your school to amount that applies to the amount of the repayment of each Direct Subsidized Loan
hold the credit balance for you, your school loan that you return. and Direct Unsubsidized Loan that you
must pay you the credit balance within the receive. Your six-month grace period begins
following timeframes: Demand for immediate repayment the day after you stop attending school or
The entire unpaid amount of your loan drop below half -time enrollment. You do not
• If the credit balance occurs after the first have to begin making payments on your loan
day of class of a payment period (your becomes due and payable (on your MPN this
is called “acceleration”) if you: until after your grace period ends.
school can tell you this date), your
If you are called or ordered to active military
school must pay you the credit balance • Receive loan money but do not enroll at duty for more than 30 days from a reserve
no later than 14 days after the date the least half-time at the school that
balance occurs. component of the U.S. Armed Forces, the
determined you were eligible to receive period of your active duty service, including
• If the credit balance occurs on or before the loan; the time necessary for you to enroll in school
the first day of class of a payment after your active duty ends, is not counted as
• Use your loan money to pay for anything
period, your school must pay you the part of your grace period. However, the
credit balance no later than 14 days other than educational expenses at the
school that determined you were eligible period that is excluded from your grace
after the first day of class of the payment period may not exceed three years. If the call
period. to receive the loan;
or order to active duty occurs while you are in
• Make a false statement that causes you school and requires you to drop below half-
Canceling your loan
to receive a loan that you are not eligible time enrollment, the start of your grace period
Before your loan money is disbursed, you to receive; or will be delayed until after the end of the
may cancel all or part of your loan at any time excluded period. If the call or order to active
• Default on your loan.
by notifying your school. After your loan duty occurs during your grace period, you will
money is disbursed, there are two ways to Avoiding Delinquency and Default receive a full six-month grace period.
cancel all or part of your loan: Repaying Your Loan
If you think you might have a problem making
• Within 14 days after the date your the scheduled payments on your loans, You must repay the full amount of your loans
school notifies you that it has credited contact the Direct Loan Servicing Center even if you: (1) do not complete your
loan money to your account at the immediately. The Direct Loan Servicing intended program of study; (2) are unable to
school, or by the first day of your Center can help you avoid the costs and obtain employment in your area of study; or
school’s payment period, whichever is negative consequences associated with (3) are dissatisfied with the education or
later (your school can tell you the first delinquency and default. services you received from your school.
day of the payment period), you may tell
your school that you want to cancel all You are delinquent if your monthly payment The repayment period for each Direct
or part of the loan money that was is not received by the due date. If you fail to Subsidized Loan and Direct Unsubsidized
credited to your account. Your school make a payment, the Direct Loan Servicing Loan that you receive begins on the day after
Center will send you a reminder that your your grace period ends. The Direct Loan
will return the cancelled loan amount to
us. You do not have to pay interest or payment is late. If your account remains Servicing Center will notify you of the date
the loan fee on the part of your loan that delinquent, the Direct Loan Servicing Center your first payment is due. If you do not
you tell your school to cancel within this will send you warning notices reminding you choose a repayment plan, you will be placed
of your obligation to repay your loans and the on the Standard Repayment Plan, but you
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Direct Loan Servicing Center: 800-848-0979 ~ www.dl.ed.gov
Entrance Counseling Guide for Direct Loan Borrowers
may change repayment plans at any time loan after 25 years under this plan, the
after you have begun repaying your loan. unpaid portion will be forgiven. You may
There is no penalty if you make loan have to pay income tax on any amount
payments before they are due. forgiven.
You may choose one of the following The chart at the end of this guide (“Entrance
repayment plans to repay your loan: Counseling Guide For Direct Loan Borrowers:
Repaying Your Loans”) allows you to
• Standard Repayment Plan – Under estimate the monthly and total amounts you
this plan, you will make fixed monthly would repay under each of the four
payments and repay your loan in full repayment plans for various initial loan
within 10 years (not including periods of amounts.
deferment or forbearance) from the date
the loan entered repayment. Your
payments must be at least $50 a month
and will be more, if necessary, to repay
the loan within the required time period.
We may need to adjust the number or
amount of your payments to reflect
changes in your loan’s variable interest
rate.
• Extended Repayment Plan – Under
this plan, you will make fixed monthly
payments and repay your loan in full
within 12 to 30 years (not including
periods of deferment or forbearance),
depending on the total amount of your
Direct Loans. Your payments must be
at least $50 a month and will be more, if
necessary, to repay the loan within the
required time period. We may need to
adjust the number or amount of your
payments to reflect changes in your
loan’s variable interest rate.
• Graduated Repayment Plan – Under
this plan, your payments will be lower at
first and will increase, usually every two
years. You will repay your loan in full
within 12 to 30 years (not including
periods of deferment or forbearance),
depending on the total amount of your
Direct Loans. Your payments must
cover the interest that accumulates on
your loan between payments and can
never be less than 50 percent or more
than 150 percent of the amount that you
would pay under the Standard
Repayment Plan. (For example, if you
would be required to pay $100 each
month under the Standard Repayment
Plan, your monthly payment under the
Graduated Repayment Plan could never
be less than $50 or more than $150.)
We may need to adjust the number or
amount of your payments to reflect
changes in your loan’s variable interest
rate.
• Income Contingent Repayment Plan –
Under this plan, your monthly payment
amount will be based on your annual
income (and that of your spouse if you
are married), your family size, and the
total amount of your Direct Loans. Until
we obtain the information needed to
calculate your monthly payment amount,
your payment will equal the amount of
interest that has accrued on your loan
unless you request a forbearance. As
your income changes, your payments
may change. If you do not repay your
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Direct Loan Servicing Center: 800-848-0979 ~ www.dl.ed.gov
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Entrance Counseling Guide for Direct Loan Borrowers: Repaying Your Loans