Direct Loans 2015-2016 All students who complete a valid FAFSA are offered Direct Loans as part of their Financial Aid package. The purpose of this document is to explain how Direct loans work and answer frequently asked questions. If you have any questions please feel free to contact our office at 508-373-9440 or email us at financialaid@becker.edu. Types of Direct Loans Subsidized Loans Subsidized loans are based upon demonstrated financial need and the federal government subsidizes the interest. No interest is charged while the student maintains an enrollment status of at least half-time (six credits). Interest does begin to accrue from the start of the six month grace period and throughout the repayment period. The interest rate for Federal Subsidized Loans for the 2015-2016 academic year, first disbursed after July 1, 2015, is 4.29%. Unsubsidized Loans Unsubsidized loans are not awarded on the basis of financial need. The loan accrues interest from the time it is disbursed until it is paid in full. If you allow the interest to accrue while you are in school or during repayment periods, this interest will be capitalized. Interest that is capitalized will be added to the principal amount of your loan, and additional interest will be based on the higher amount. The interest rate for Federal Unsubsidized Loans, first disbursed after July 1, 2014, is 4.66%. Undergraduate Interest Rate The interest rate for Federal Unubsidized Loans for the 2015-2016 academic year, first disbursed after July 1, 2015, is 4.29%. Graduate Interest Rate The interest rate for Federal Unubsidized Loans for the 2015-2016 academic year, first disbursed after July 1, 2015, is 5.84%. Parent Plus Loans for Undergraduate Dependent Students (PLUS) The Parent Loan for Undergraduate Students (PLUS) enables parents of dependent undergraduates to borrow an amount equal to cost of attendance, less other financial aid. Parent loans differ from student loans in that repayment of the loan begins 60 days after the loan is fully disbursed, however parents can defer these payments while their student is attending college at least half-time (6 credits). The interest rate for Federal PLUS Loans for the 2015-2016 academic year, first disbursed after July 1, 2015, is 6.84%. To apply for a parent plus loan go to www.studentloans.gov and click on Sign in. When signing in, use the information of the parent applying for the loan. Click on Apply for a Parent Plus Loan and follow the directions. Applications for the 2015-2016 year will be available beginning April 1, 2015. Graduate Plus Loan Graduate and Professional degree students are now eligible to borrow Graduate PLUS Loans under the William D. Ford Direct Loan Program. Students may borrow up to the cost of attendance minus other financial aid. This loan for the 2015-2016 academic year has a fixed interest rate of 6.84%. The current interest rates for these loans can be found at http://www.direct.ed.gov/calc.html The repayment period for a Direct Grad PLUS borrower begins on the date of the final disbursement of the loan and the first payment is due within 60 days of the final disbursement of that loan. The Grad PLUS borrower may apply for an in-school deferment by 1
submitting an In-School Deferment Request to the Direct Loan Servicing Center. Loan funds are disbursed directly to Assumption College in equal amounts over each term of enrollment for the academic year. Origination Fees for Direct Loans Federal Stafford Loan Fee - The origination fee is held by the U.S. Department of Education as an expense of assuming a Direct Loan. Loans with a first disbursement date prior to October 1, 2015 will have a 1.073% fee deducted from each loan disbursement. Loans with a first disbursement date on or after October 1, 2015 will have a 1.068% fee deducted from each loan disbursement. Federal Parent and Graduate PLUS Loan Fee The origination fee is held by the U.S. Department of Education as an expense of assuming a Direct Loan. Loans with a first disbursement date prior to October 1, 2015 will have a 4.292% fee deducted from each loan disbursement. Loans with a first disbursement date on or after October 1, 2015 will have a 4.272% fee deducted from each loan disbursement. Interest Calculation When Interest Accrues Interest accrues on your unsubsidized student loan: Every day, from the day the loan is disbursed until you make the last payment. Even if your loan is not in repayment. Interest accrues on your subsidized student loan: Every day, from the day the repayment period starts until you make the last payment. During your grace period if your loan was disbursed on or after July 1, 2012 and before July 1, 2014. Interest does not accrue on your subsidized student loan during: Your in-school status as long as you are attending at least 6 credits (half-time) An approved deferment. Calculating Accrued Interest To calculate your daily interest accrual, use the following formula: Interest rate x current principal balance number of days in the year = daily interest 2
Example Sara Student borrowed $2,000 in an Unsubsidized Direct Loan with a 4.29% interest rate. The loan was disbursed in two disbursements of $1,000 each on 9/30/14 and 02/02/15. Using the formula:.0429 x $1,000.00 365 =.11753424657 (round to $.12) After year 1 Sara Student s accrued interest will be (calculation date of May 5, 2015): 09/30/14 disbursement 219 days x.12 = $26.28 02/02/15 disbursement 94 days x.12 = $11.28 Total Interest = $37.56 How Payments Apply to Interest vs. Current Principal Balance When you make a payment, your servicer s computer system counts the number of days since your servicer processed your last payment. Then we apply your payment as follows: 1. Accrued interest The amount of interest that accrued every day between the date of the last payment and the new payment must be satisfied first. 2. Current principal balance The remainder then applies toward your current principal balance. The best way to control the amount that applies toward interest versus principal is to make your payments regularly and on time. The easiest way to do this is to use ECH Payments (automatic payment through your bank). Loan Requirements and Financial Literacy Entrance Counseling Entrance counseling explains the obligations you agree to meet as a condition of receiving a Direct Loan. If you are a student and have not previously received a subsidized/unsubsidized loan or PLUS loan (graduate/professional students only) under the Direct Loan Program or Federal Family Education Loan (FFEL) Program at Becker College, you must complete entrance counseling for that loan type before receiving a loan to ensure that you understand your responsibilities and the obligations you are assuming. Topics include: Understand Your Loans Manage Your Spending Plan to Repay Avoid Default Make Finances a Priority 3
To complete entrance counseling for Direct Subsidized/Unsubsidized Loans and Direct PLUS Loans: Sign into this Web site using your Federal Student Aid PIN. Use of another person's PIN constitutes fraud. Use only your own PIN information. Select "Complete Counseling" found in the left navigation bar Select "Entrance Counseling" under "Choose Counseling Type" Select the school(s) you want to notify of counseling completion Select "Student Type" (Undergraduate or Graduate/Professional) 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 three types of MPNs in the Direct Loan Program: one for Direct Subsidized/Unsubsidized Loans, one for Direct PLUS Loans, and one for Direct Graduate PLUS Loans. If you are an undergraduate or a graduate/professional student attending a school that is authorized and chooses to make multiple loans under the same MPN for more than one academic year, you may be required to sign only one MPN for all of your Direct Subsidized Loans and Direct Unsubsidized Loans. 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 academic years. Note: Graduate/professional students aren't eligible for Direct Subsidized Loans. To complete an electronic MPN: From the StudentLoans.gov home page, click on the "Sign In" button located in the "Manage My Direct Loans" box. The Sign In page will appear. Use of another person's PIN constitutes fraud. Use only your own PIN information. Once signed in, click on the "Complete MPN" option located under the "Master Promissory Note" heading on the left menu bar. The Master Promissory Note (MPN) page will appear. Select the type of loan you would like to receive. Follow the instructions to complete, sign, and submit your MPN. Financial Literacy Becker College strongly believes that our graduates must be financially literate before going on to graduate school or entering the workforce. To help our students become financially literate, Becker College has teamed up with ASA to offer SALT. SALT is designed to empower college students and alumni to confidently approach, manage, and pay back their student loans while gaining financial skills for life offering a comprehensive continuum of services aligned to the student life cycle: from college financing through successful loan repayment. To sign up for SALT, please visit www.saltmoney.org/becker. Information about SALT is provided to our students at multiple events on campus, stay tuned! 4
Direct Loan FAQ s 2014-2015 Annual and Aggregate Limit FAQ How much can I borrow under a Direct Loan? These Federal Direct loan limits are for the 2015-2016 academic school year. The loan limits are based on the student's grade level and dependency status. Independent students can borrow more because they are paying for college without assistance from their family. Dependent students whose parents were denied a Federal Parent PLUS loan are eligible to borrow at the independent student limits. It is important to note that even if a student is financially self-sufficient and paying for his/her education on his/her own, dependency status is still determined by the school. Grade Level Freshman Sophomore Dependent Undergraduate Student $5,500 (max $3,500 subsidized) $6,500 (max $4,500 subsidized) Independent Undergraduate Student $9,500 (max $3,500 subsidized) $10,500 (max $4,500 subsidized) Juniors, Seniors and Beyond $7,500 (max $5,500 subsidized) $12,500 (max $5,500 subsidized) Cumulative Aggregate Limit $31,000 (max $23,000 subsidized) $57,500 (max $23,000 subsidized) Can my loan be increased mid academic year? Students whose grade level changes mid-year, become eligible for the full amount of Direct Loans for the new grade level. Example Sara Student is awarded in the fall as a dependent freshman student and receives $3500 in Subsidized and $2,000 in Unsubsidized Direct Loans. Sara successfully completes enough credits to make her a Sophomore. Sara s loans subsidized loan is then increased to $4500. 5
Interest FAQ s How does interest accrue on my student loan? Interest accrues daily on your student loan from the day it's disbursed until the day your loan balance reaches zero. We use a simple formula to calculate your daily interest accrual: Interest rate current principal balance number of days in the year = daily interest What is Capitalization? Capitalization is the addition of unpaid accrued interest to the principal balance of your loans. This means that your principal balance increases, so you will pay more in interest over the life of the loans. For example, during periods of deferment, you are only responsible for accrued interest on unsubsidized loans. Review the comparison chart below to see how paying your outstanding interest while in school or in periods of deferment and forbearance can impact your monthly payment and your total amount to be repaid. Category If you can't or don't pay your outstanding interest: If you pay your outstanding interest: Original Loan Balance $20,000 $20,000 Capitalized Interest accrued while in school $5,700 $0 Total Interest paid prior to repayment: $0 $5,700 Loan Balance when entering repayment $25,700 $20,000 Interest Rate 6.8% 6.8% Monthly Payment $295.76 $230.16 Total Repayment Amount $35,489.54 $33,318.29 *This figure includes the $5,700 in interest you previously paid. In the example above you would save more than $65 per month if you paid the outstanding interest before it capitalized (was added to the principal balance). 6
Does interest accrue on my loan while I have a deferment or forbearance? Yes. Interest accrues on your loan, but you may not be responsible for paying it. It depends on the type of loan you have and whether you have a deferment or forbearance. If you have a deferment Subsidized loans The government pays the interest that accrues.* Unsubsidized loans You are responsible for paying the interest that accrues. If you have a forbearance All loans You are responsible for paying the interest that accrues. If you are responsible for paying the interest that accrues, you will receive an interest notice 20 days before the end of your deferment or forbearance advising of the total amount of outstanding interest. Any interest that you do not pay will capitalize (be added to your principal balance) when the deferment or forbearance ends. Capitalization increases your principal balance, meaning you will pay more over the life of the loan. * NOTE: If you are a first-time borrower on or after July 1, 2013, you could potentially lose the subsidy on your subsidized student loan if you do not complete your degree or certificate within 150% of the "normal time" allotted for completing the program in which you are enrolled. The loss of subsidy means you would be responsible for paying the interest during periods of enrollment and any grace or deferment periods. What is an interest notice? An interest notice differs from a bill in that you're not required to make a payment. We will send you an interest notice approximately 20 days before your grace period ends or before a deferment or forbearance ends. You'll receive an interest notice unless you specifically requested to make interest payments while you are in school or your loan is in grace, deferment, or forbearance. If you want to pay interest during these times, please send your servicer a letter requesting this, and we will send you quarterly interest bills instead of an interest notice. I am still in school. Why haven t I received any bills or notices regarding the interest on my loan? Unless you specifically requested to be billed for the interest on your loans, your servicer will send only one interest notice to you approximately 20 days before your grace period ends. Can I make interest payments even if I do not receive a bill? Yes. If you have an unsubsidized loan, making interest payments while you are in school can minimize the amount of interest that will capitalize (be added to your principal balance) when your account enters repayment. And you will pay less over the life of the loan. Do I need to pay interest on my loan while in school? It depends on what type of loan you have: Subsidized Loans No. The government pays the interest on your loan while you are in school.* Unsubsidized Loans No. It is not necessary to pay the interest while you are in school or while you have an in-school deferment. However, paying interest early, before you have to, saves you money in the long run. Any interest that you do not pay during this period will be added to your principal balance (through capitalization). Because capitalization increases your principal, you end up paying more in interest, which leads to more overall costs. Parent PLUS Loans You can postpone making monthly payments on your loans while the student is enrolled at least half time and for 6 months after the student is no longer enrolled. Interest accrues from the day of disbursement. If you do not pay this interest, it will be added to your principal balance prior to your loans entering repayment. 7
* NOTE: If you are a first-time borrower on or after July 1, 2013, you could potentially lose the subsidy on your subsidized student loan if you do not complete your degree or certificate within 150% of the "normal time" allotted for completing the program in which you are enrolled. The loss of subsidy would continue through periods of enrollment and any grace or deferment periods. 8