Are you a new borrower? A loan counselor can help you at many stages!
General info for new borrowers entering school
It depends on the following items. Please be aware this is a very oversimplified version of how this process works:
-Expected family contribution (EFC)
-Year in school
-Cost of attendance; (COA) the financial aid staff starts by deciding upon your COA
-School subtracts your EFC from your COA to determine how much your fianancial aid need is; this determines need based aid
-Your non-need based aid is how much aid you’ve received already subtracted from cost of attendance of the school.
These are for Direct Subsidized and Unsubsidized Loans
First disbursement date of on or after December 1, 2013, and before October 1, 2014-1.072%
|*If your loans are first disbursed prior to December 1, 2013, you will have different loan fees|
-Your loans can either be Government or private loans
-Private loans have different requirements than government for deferments, forbearances and payment plans; while most do not start payments till after you are no longer eligible In-School status, this is not guaranteed
-Government loans are either Subsidized, Unsubsidized, or Perkins Loans
-For subsidized loans, interest is paid by government while in school and while in grace if disbursed before 7/1/12
-For unsubsidized loans, interest accrues from the day the loan is disbursed
Dependent Students (excludes those whose parents cannot obtain Parent PLUS loans)
Independent Students (includes dependent undergraduate students whose parents are unable to obtain PLUS Loans)
|First-Year||No more than $5,500 (No more than $3,500 in subsidized loans)||No more than $9,500 (No more than $3,500 in subsidized loans)|
|Second-Year Undergraduate Annual Loan Limit||No more than $6,500 (No more than $4,500 in subsidized loans)||No more than $10,500 (No more than $4,500 in subsidized loans)
|Third-Year and Beyond Undergraduate Annual Loan Limit||No more than $7,500 (No more than $5,500 in subsidized loans)
|No more than $12,500 (No more than $5,500 in subsidized loans)
|Graduate or Professional Students Annual Loan Limit||Not Applicable since all graduate/professional students are considered independent students||No more than $20,500 (unsubsidized only)|
|Subsidized and Unsubsidized Aggregate Loan Limit||No more than $31,000 (No more than $23,000 in subsidized loans)||No more than $57,500 for undergraduates (No more than $23,000 in subsidized loans)
No more than $138,500 for graduate/professional students (No more than $65,500 in subsidized loans)
Graduate aggregate limit includes all federal loans received for undergraduate study.
General info for new borrowers while in school
Borrower cancellation payments occur when you make a payment within 120 days of any disbursement. Instead of the money being applied to your interest first and principal second like a normal payment, this money goes straight to your principal and cancels out your interest. Here is an example to demonstrate the power of borrower cancellation payments:
A borrower has an original balance of $5,000.00 and an interest rate of 6.8%. The borrower makes a $2,000.00 payment 90 days after disbursement (which is within the 120 day cancellation window). For this example we will assume this is the first payment on the loan the borrower has made. Here is how the payment is applied as a regular vs cancellation payment.
To calculate we must know how interest accrual works. Remember interest is figured by taking principal x int rate/365. In this example that is $5,000 x .068/365=$.93/day. Since this is the first payment made and 90 days of interest has accrued we multiply the daily interest amount by the number of days—> $.93 x 90=$83.70.
When a regular borrower payment is made, interest is satisfied first with the rest going to principal. So the $83.70 goes to interest and $1,916.30 to principal. This reduces the borrower’s principal balance to $3,083.70.
However if the payment is a cancellation payment, it goes straight to principal and cancels recalculates the interest. So the same $2,000 payment does the following. $5,000 (original balance)-$2,000 (borrower cancellation payment)=$3,000 (new principal balance interest is calculated off of). If you figure out 90 days of interest on $3,000 the equation looks like this:
$3,000 x .068/365=$.56/day; when you multiple $.56/day x90 days of interest=$50.40. You add your new principal plus the interest accrual together to get your new balance of $3,050.40.
As a result your payment of $2,000 was really like making a payment of $2,033.30 because of the cancelled interest.
You sign a Master Promissory Note (MPN) for your loan balance.
Sometimes more money is awarded than what is in the MPN. Legally you are not required to pay back this overage.
However the Department of Education can refuse to give you more loans until you either pay back the difference or sign a new MPN for the full amount. In order to remedy this situation, you need a Reaffirmation Letter.
This letter is sent from your servicer however the following information is needed: Whether it is grad or undergrad, amount overrewarded, name and fax of contact in financial aid, and if you are paying it back or adding it to the loan
You are not required to make payments while in school.
However this is beneficial to you as it helps keep down the interest that is accruing on unsubsidized loans (and subsidized for grace in some cases).
Any interest that is left once you enter repayment will be added to the principal and make your daily interest higher.
For this reason it is a very smart idea to pay while in school. You can even target your payments to what is most advantageous for you!
Begins 6 months after you withdraw, graduate, or start attending less than half time
You only receive one grace period. Once you use it and leave school again in the future that loan will go instantly back into repayment (but is sometimes covered by an Alignment of Repayment Forbearance)
Consolidation loans are not eligible for grace or Alignment of Repayment Forbearance
General resources to view once you enter repayment...
Once you enter repayment after your grace period, that is where the decisions begin. We have plenty of resources throughout studentloaninsider.org to help.
-To see what constitutes staying in school, check out our Enrollment page
-To decide what Repayment Plan works best for you, check out our Repayment Plans page
-If you can't afford payments and need to view your deferment or forbearance options, view our Deferment/Forbearance page