Federal Direct Stafford Loans

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Changes for the 2013-2014 year

The Bipartisan Student Loan Certainty Act of 2013 was passed by the federal government on August 9, 2013. The new law amends the interest rate formula for all Direct Loan types and applies to loans for which the first disbusement is made on or after July 1, 2013. The amount of funding available does not change, but the interest rates on the loans will now be based on the 10-year Treasury bill, WHICH HAS LOWERED THE RATES FOR 2013-2014 (see table below for rates). Here is a summary of changes affecting loans for 2013-2014:

1. Loans will be "variable-fixed", meaning students will receive a new rate with each new loan, but then that rate is fixed for the life of the loan. Interest rates will be established each year for the loans with the first disbursement after July 1 through the following June 30. As a result, it is likely that borrowers who take out loans over multiple years will have a set of fixed-rate loans, each with a different interest rate.

2. Interest rates will be the same for Direct Subsidized Loans and Direct Unsubsidized Loans taken out by an undergraduate student, with a different rate for Direct Unsubsidized Loans taken out by a graduate student. PLUS loans taken out by parent borrowers or graduate student borrowers have the same rate.

3. As a reminder, under the sequester, the loan fee for Direct Subsidized Loans and Direct Unsubsidized Loans disbursed between July 1, 2013 and November 30, 2013, was increased from 1.0% to 1.051%, and the loan fee for Direct PLUS Loans was increased from 4.0% to 4.204%. For Stafford loans and PLUS loans first disbursed December 1, 2013 and later, the loan fees will be 1.072% and 4.288%, respectively. 

4. Loss of subsidy for grace period: For Subsidized Stafford Loans disbursed on or after July 1, 2012 and before July 1, 2014, the subsidy will end when the student enters the grace period. Note: this applied for the 2012-2013 school year as well as the 2013-2014 school year.

What are Direct Subsidized and Unsubsidized Loans?

A Direct Subsidized or Unsubsidized Loan is a student loan in the student’s name for educational purposes. The loan funds come from the government and are categorized as either “subsidized” or “unsubsidized". Loan repayment is deferred while the student is enrolled in school at least half-time and during the 6-month grace period after the student either graduates or drops below half-time. When the grace period is finished, the student starts repayment on the loan. However, if the student decides to go to graduate school, the loan will go back into deferment.

What is the difference between a “Subsidized” and an “Unsubsidized” Direct Loan?

The financial need of the student determines whether a loan is subsidized. The federal government “subsidizes” the interest of the loan, i.e. pays the interest, while the student is enrolled at least half-time.

An unsubsidized loan is not awarded based on financial need. The student will be charged interest on the loan from the time it disburses until it is paid in full. The student has two options: to defer interest payments until graduation, in which case the interest will be added to the principal amount of the loan, or, to pay the interest while in school and not have it accrue.The interest rate on Direct Unsubsidized Loans will differ depending on whether the student is an undergraduate or graduate student.

How much can the student borrow in Direct Subsidized and Unsubsidized Loans?

Dependent undergraduates have a Direct Loan maximum amount that they can borrow per academic year: For 2013-2014, the amounts are as follows:

  • $5,500 for freshmen, of which a maximum of $3,500 may be Subsidized
  • $6,500 for sophomores, of which a maximum of $4,500 may be Subsidized
  • $7,500 for juniors, of which a maximum of $5,500 may be Subsidized
  • $7,500 for seniors, of which a maximum of $5,500 may be Subsidized

Independent undergraduates can borrow the same amounts as above, plus an additional $4,000 of Direct Unsubsidized Loan for freshmen and sophomores, and $5,000 for juniors and seniors.

What is the interest rate?

Below is a table that displays the interest rates for loans disbursed (paid out) on or after July 1, 2013 and before July 1, 2014 (since July 1, 2012, graduate students are not eligible for a Direct Subsidized Loan):

   Fixed Interest Rate for Loans First Disbursed July 1, 2013 through June 30, 2014

Undergraduate Stafford

(Subsidized and Unsubsidized) 

                                                 3.86%

 Graduate Stafford

(Unsubsidized)

                                                 5.41%

 PLUS

(Parent and Graduate)

                                                 6.41%

 

How does the student apply?

  1. Complete the FAFSA.
  2. Complete any documents requested by the Financial Aid Office.
  3. The student must accept loans online on myWheaton--This gives the Financial Aid Office permission to transmit information to the Department of Education.
  4. First-time borrowers must complete Loan Entrance Counseling.
  5. First-time borrowers must complete a master promissory note (MPN).
Where do I go for entrance counseling and to sign the MPN?
The Department of Education has a website called Studentloans.gov which it has established for students to manage their Direct Loans. (Beware--there is also a studentloans.com site which is NOT the government site).

 You will need to use your FAFSA PIN to access the site and to sign the MPN. If you do not have a PIN, you may obtain one at PIN web site.

IMPORTANT:On the website, there is important information about browser requirements under "What You Need". If you do not have a compatible browser, various features will not work.

Changes for the 2013-2014 year

The Bipartisan Student Loan Certainty Act of 2013 was passed by the federal government on August 9, 2013. The new law amends the interest rate formula for all Direct Loan types and applies to loans for which the first disbusement is made on or after July 1, 2013. The amount of funding available does not change, but the interest rates on the loans will now be based on the 10-year Treasury bill, WHICH HAS LOWERED THE RATES FOR 2013-2014 (see table below for rates). Here is a summary of changes affecting loans for 2013-2014:

1. Loans will be "variable-fixed", meaning students will receive a new rate with each new loan, but then that rate is fixed for the life of the loan. Interest rates will be established each year for the loans with the first disbursement after July 1 through the following June 30. As a result, it is likely that borrowers who take out loans over multiple years will have a set of fixed-rate loans, each with a different interest rate.

2. Interest rates will be the same for Direct Subsidized Loans and Direct Unsubsidized Loans taken out by an undergraduate student, with a different rate for Direct Unsubsidized Loans taken out by a graduate student. PLUS loans taken out by parent borrowers or graduate student borrowers have the same rate.

3. As a reminder, under the sequester, the loan fee for Direct Subsidized Loans and Direct Unsubsidized Loans disbursed between July 1, 2013 and November 30, 2013, was increased from 1.0% to 1.051%, and the loan fee for Direct PLUS Loans was increased from 4.0% to 4.204%. For Stafford loans and PLUS loans first disbursed December 1, 2013 and later, the loan fees will be 1.072% and 4.288%, respectively. 

4. Loss of subsidy for grace period: For Subsidized Stafford Loans disbursed on or after July 1, 2012 and before July 1, 2014, the subsidy will end when the student enters the grace period. Note: this applied for the 2012-2013 school year as well as the 2013-2014 school year.

What are Direct Subsidized and Unsubsidized Loans?

A Direct Subsidized or Unsubsidized Loan is a student loan in the student’s name for educational purposes. The loan funds come from the government and are categorized as either “subsidized” or “unsubsidized". Loan repayment is deferred while the student is enrolled in school at least half-time and during the 6-month grace period after the student either graduates or drops below half-time. When the grace period is finished, the student starts repayment on the loan. However, if the student decides to go to graduate school, the loan will go back into deferment.

What is the difference between a “Subsidized” and an “Unsubsidized” Direct Loan?

The financial need of the student determines whether a loan is subsidized. The federal government “subsidizes” the interest of the loan, i.e. pays the interest, while the student is enrolled at least half-time.

An unsubsidized loan is not awarded based on financial need. The student will be charged interest on the loan from the time it disburses until it is paid in full. The student has two options: to defer interest payments until graduation, in which case the interest will be added to the principal amount of the loan, or, to pay the interest while in school and not have it accrue.The interest rate on Direct Unsubsidized Loans will differ depending on whether the student is an undergraduate or graduate student.

How much can the student borrow in Direct Subsidized and Unsubsidized Loans?

Dependent undergraduates have a Direct Loan maximum amount that they can borrow per academic year: For 2013-2014, the amounts are as follows:

  • $5,500 for freshmen, of which a maximum of $3,500 may be Subsidized
  • $6,500 for sophomores, of which a maximum of $4,500 may be Subsidized
  • $7,500 for juniors, of which a maximum of $5,500 may be Subsidized
  • $7,500 for seniors, of which a maximum of $5,500 may be Subsidized

Independent undergraduates can borrow the same amounts as above, plus an additional $4,000 of Direct Unsubsidized Loan for freshmen and sophomores, and $5,000 for juniors and seniors.

What is the interest rate?

Below is a table that displays the interest rates for loans disbursed (paid out) on or after July 1, 2013 and before July 1, 2014 (since July 1, 2012, graduate students are not eligible for a Direct Subsidized Loan):

   Fixed Interest Rate for Loans First Disbursed July 1, 2013 through June 30, 2014

Undergraduate Stafford

(Subsidized and Unsubsidized) 

                                                 3.86%

 Graduate Stafford

(Unsubsidized)

                                                 5.41%

 PLUS

(Parent and Graduate)

                                                 6.41%

 

How does the student apply?

  1. Complete the FAFSA.
  2. Complete any documents requested by the Financial Aid Office.
  3. The student must accept loans online on myWheaton--This gives the Financial Aid Office permission to transmit information to the Department of Education.
  4. First-time borrowers must complete Loan Entrance Counseling.
  5. First-time borrowers must complete a master promissory note (MPN).
Where do I go for entrance counseling and to sign the MPN?
The Department of Education has a website called Studentloans.gov which it has established for students to manage their Direct Loans. (Beware--there is also a studentloans.com site which is NOT the government site).

 You will need to use your FAFSA PIN to access the site and to sign the MPN. If you do not have a PIN, you may obtain one at PIN web site.

IMPORTANT:On the website, there is important information about browser requirements under "What You Need". If you do not have a compatible browser, various features will not work.