Frequently Asked Questions
- What types of loans are offered?
The Direct Loan Program offers the following types of loans:
- Subsidized: for students with demonstrated financial need, as determined by federal regulations.
- Unsubsidized: not based on financial need; interest is charged during all periods, even during the time a student is in school and during grace and deferment periods.
- PLUS: unsubsidized loans for the parents of dependent students and for graduate/professional students. PLUS loans help pay for education expenses up to the cost of attendance minus all other financial assistance. Interest is charged during all periods.
- Consolidation: Eligible federal student loans can be combined into one Direct Consolidation Loan
- Is there a credit check for Direct Loans?
A credit check is only required for the Direct PLUS (parent) Loan. When you apply for a Direct PLUS Loan, the Department of Education will check your credit history. To be eligible to receive a PLUS Loan, you must not have an adverse credit history. If you are determined to have an adverse credit history, you may still receive a Direct PLUS Loan if you obtain an endorser who does not have an adverse credit history. An endorser is someone who agrees to repay the Direct PLUS Loan if you do not repay the loan. If you are a parent borrowing on behalf of your dependent student, the endorser may not be the student on whose behalf a parent obtains a Direct PLUS Loan. In some cases, you may also be able to obtain a Direct PLUS Loan if you document to our satisfaction that there are extenuating circumstances related to your adverse credit history.
- What is a Master Promissory Note (MPN)?
The MPN is a promissory note that can be used to make one or more loans for one or more academic years (up to 10 years).
There are two types of MPN's in the Direct Loan Program: one for student loans and one for parent PLUS loans.
If you are a student borrower under the Direct Loan Program attending a school that is authorized and chooses to make multiple loans under the same MPN for more than one academic year, you will only sign one MPN for student loans. It will be used for all of your academic years. For example, if you enroll in college as a freshman and borrow under the Direct Loan Program for all years of study, you may be able to borrow under this one MPN for all years.
If you are a parent borrower under the Direct Loan Program whose child is attending a school that is authorized and chooses to make multiple loans under the same MPN for more than one academic year, you will only sign one MPN for parent PLUS loans. It will be used for all of your Direct PLUS loans for that particular child over multiple academic years.
- Will I be able to save my electronic MPN prior to submitting it and return at a later time to complete it?
No. You will need to complete the entire electronic MPN process in a single session. If you exit the website before submitting your MPN and return later, you will have to start over from the beginning of the process.
- Can I receive my loan without completing the Master Promissory Note (MPN)?
No. To take out a Direct Loan for the first time, you must complete a Master Promissory Note (MPN).
- How do I complete a Master Promissory Note (MPN)?
To complete an MPN online, you will be required to use your Department of Education-issued PIN. If you do not have a PIN, you may request one from the official PIN site. A parent borrower must also request a PIN number from the PIN site to use when completing a PLUS MPN. You can complete the MPN online at the Direct Loans Master Promissory Note website (https://studentloans.gov/). The MPN is a legal document in which you promise to repay your loan(s) and any accrued interest and fees to the Department of Education. It also explains the terms and conditions of your loan. If you are taking out a loan to pay for your own education, then you should complete a new MPN for student loans. If you are taking out a loan to pay for your child's education, then you should complete a new MPN for parent PLUS loans. You should evaluate the aid offer carefully and keep in mind that whatever amount you borrow, must be paid back with interest.
- Is there a limit to the amount of time I am eligible to receive a Direct Loan?
- Yes, as a result of legislation enacted in July 2012, eligibility for the Direct Loan interest subsidy will be limited for new borrowers on or after July 1, 2013. The law restricts the period of time for which a borrower may receive subsidized loans, in the aggregate, to 150 percent of the published length of the student's current educational program. Once the student reaches that limit, he or she may borrow only unsubsidized loans, and interest begins to accrue on the student's outstanding subsidized loan.
- How will I get the loan money?
You'll be paid through LFCC, generally in at least two installments. No installment may exceed one-half of your loan amount. LFCC will use your loan money first to pay for tuition and fees, and/or other school charges. If any loan money remains, you'll receive the funds by check, mailed to your address on file with the college, about 4-6 weeks into the semester, unless you give us written authorization to hold the funds until later in the enrollment period.
- What are the current interest rates?
- Direct Subsidized Loans:
Undergraduate students—The interest rate is fixed at 4.66% for all undergraduate borrowers for 2014-15.
- Direct Unsubsidized Loans:
The interest rate is fixed at 4.66% for all undergraduate borrowers for 2014-15.
- Parent PLUS Loans:
The interest rate is fixed at 7.21% for 2014-15.
Prior Federal Loans and Financial Aid History—If you currently have a Stafford Loan and would like to check the interest rate, servicer information, and other financial aid history, go to the National Student Loan Data System.
- Other than interest, is there a charge for this loan?
There is a loan fee on all Direct Subsidized and Unsubsidized Loans. The loan fee is a percentage of the amount of each loan you receive and is 1.072% (1.073% for Direct Subsidized and Unsubsidized Loans first disbursed on or after Oct. 1, 2014 and before Oct. 1, 2015). For Direct PLUS loans, the loan fee is 4.288% (4.292% Direct PLUS Loans first disbursed on or after Oct. 1, 2014 and before Oct. 1, 2015). We will deduct the loan fee proportionately from each loan disbursement. The specific loan fee that you are charged will be reflected in a disclosure.
- How do I pay back my loans?
When you receive your first Direct Loan, you will be contacted by the servicer for that loan (you repay your loan to the loan servicer). Your loan servicer will provide regular updates on the status of your Direct Loan, and any additional Direct Loans that you receive. If you're not sure who your loan servicer is, you can look it up on www.nslds.ed.gov.
- When do I begin repaying my loans?
After you graduate, leave school, or drop below half-time enrollment, you will have a six-month grace period before you begin repayment. During this period, you'll receive repayment information from your loan servicer, and you'll be notified of your first payment due date. Payments are usually due monthly.
Repayment Plans—The Direct Loan Program offers several repayment plans that are designed to meet the different needs of individual borrowers. Generally, you'll have 10 to 25 years to repay your loan, depending on the repayment plan that you choose. You will receive more detailed information on your repayment options during entrance and exit counseling sessions at your school. To learn more about Direct Loan repayment plans, you can go to the following link: Repayment Information.
- What if I have trouble repaying the loan?
Under certain circumstances, you can receive a deferment or forbearance that allows you to temporarily stop or lower the payments on your loan. For more information, you can go to the following link: Repayment Information.
- Can my loan be cancelled (discharged)?
Yes, but only under a few circumstances. For more information, you can go to the following link: Cancellation/Discharge.
You also may qualify for forgiveness of some or all of your loan balance:
- If you teach full-time for five years at a school or educational service agency serving low-income families and meet other requirements, or
- After you have made 120 payments on a Direct Loan while employed in certain public service jobs (additional conditions apply).
Contact Karen Goulbourne
Toll free: 1-800-906-5322, ext. 7153