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Federal Direct Student Loan Program

 


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If you are interested in the Federal Direct Student Loan Program
PLEASE READ ENTIRE PAGE BELOW CAREFULLY

 

 

WHAT IS A FEDERAL DIRECT STUDENT LOAN?

A Federal Direct Student Loan provides low interest loans that enable students to borrow up to $5,500 at the freshman level, $6,500 at the sophomore level, and $7,500 at the junior and senior undergraduate level; Cumulative limits - $31,000 for dependent undergraduates and $57,500 for independent undergraduates with no more than $23,000 in subsidized loans.

Since July 1, 2010, all new federal education loans have been originated through the Federal Direct Student Loan Program (FDSLP). The loans are administered through “Direct Lending Schools” and are provided/serviced by the U.S. government directly to students.

These loans have low interest rates Interest Rate 2013-2014: Subsidized – 3.86% fixed
Unsubsidized – 3.86% fixed

Interest Rate 2014-2015: Subsidized – 4.66% fixed
Unsubsidized – 7.21% fixed
and do not require credit checks or collateral. Student loans also provide a variety of deferment options and extended repayment terms. Loan funds are subject to a 1.072% loan fee which is deducted from each disbursement check. Repayment begins six months after the student graduates or drops below half-time enrollment. Average loan indebtedness at Allegany College of Maryland is currently $9,144 per graduate.


The main federal loan for students is called the Stafford Loan and has two variations:

Subsidized Loan - is awarded on the basis of need. For qualified applicants, the federal government pays the interest on the loans until the student finishes college, ceases enrollment, and/or during authorized periods of deferment.

Unsubsidized Loan- is not awarded on the basis of need. Qualified applicants will be charged interest from the time the loan is disbursed until it is paid in full. Students can pay the interest while in school or during a period of deferment or forbearance or can allow the interest to accrue (or accumulate) and have the interest added to the principal amount of the loan. This will increase the total amount of the loan to be repaid because students are charged interest on a higher principal amount.

Federal Direct Loans may be processed as subsidized or unsubsidized depending on the borrower’s eligibility. The types of loans a borrower is eligible for will depend on the student’s Free Application for Federal Student Aid (FAFSA) results.

REQUIREMENTS: Show financial need as determined by the U.S. Department of Education; be enrolled as a regular degree-seeking student; be a citizen or a permanent resident of the U.S.; be an undergraduate student.

DEADLINE: No deadline date; however, students must have a signed Master Promissory Note before their last day of class.


HOW MUCH CAN I BORROW?  

The following chart illustrates the annual and aggregate loan limits for the subsidized and unsubsidized Stafford Loans first disbursed on or after July 1, 2008.  

*ACM can only originate loans through the sophomore level.

 

ANNUAL LOAN LIMITS

Dependent Students
(whose parents were not denied a PLUS loan)

Combined Base Limit for Subsidized and Unsubsidized Loans

Additional Limit for Unsubsidized Loans

Total Limit for Unsubsidized Loans (minus subsidized amounts)

First-Year Undergraduate (Freshman - 0-27 credit hours earned)

$3,500

$2,000

$5,500

Second-Year Undergraduate (Sophomore - 28+ credit hours earned)

$4,500

$2,000

$6,500



ANNUAL LOAN LIMITS

Independent Students
(and dependent students whose parents were denied a PLUS loan)

Combined Base Limit for Subsidized and Unsubsidized Loans

Additional Limit for Unsubsidized Loans

Total Limit for Unsubsidized Loans (minus subsidized amounts)

First-Year Undergraduate (Freshman - 0-27 credit hours earned)

$3,500

$6,000

$9,500

Second-Year Undergraduate (Sophomore - 28+ credit hours earned)

$4,500

$6,000

$10,500



AGGREGATE LOAN LIMITS
 

Combined Base Limit for Subsidized and Unsubsidized Loans

Additional Limit for Unsubsidized Loans

Total Limit for Unsubsidized Loans (minus subsidized amounts)

Dependent Undergraduate Students (whose parents were not denied a PLUS loan)

$23,000

$8,000

$31,000

Independent Undergraduate Students (and dependent students whose parents were denied a PLUS loan)

$23,000

$34,500

$57,500



WHAT IS THE CURRENT INTEREST RATE?

Effective July 1, 2014, for loans first disbursed on or after 7/1/14 and before 7/1/15, the interest rate for both subsidized and unsubsidized loans is 4.66% for Undergraduate students and 7.21% for Graduate and Professional students.


HOW DO I APPLY FOR A FEDERAL DIRECT STUDENT LOAN?

Students must complete the FAFSA and have a complete financial aid file for the academic year before the Federal Direct Loan will be awarded. Eligibility for loan funds will be listed on the Award Notification Letter mailed from the Student Financial Aid Office. The approved amounts will be pending until receipt of the Loan Acceptance Form also included with the Award Notification Letter.

Students must attend a minimum of six credit hours per semester in order to be eligible for a Federal Direct Loan.
A completed file includes:

  • FAFSA results
  • Either completion of the IRS Data Retrieval process OR official IRS Federal Tax Return Transcript
  • Non-tax filing statement, if applicable
  • Verification Worksheet
  • Final High School transcript or copy of GED on file in the Admissions Office
  • Authorization to Pay Expenses from Financial Aid Form

New/Transfer Borrowers:

  • Cancel all loan(s) and other aid at prior institution that cover the same period of enrollment desired at Allegany College of Maryland.
  • ACM will notify previous lender(s) and/or servicer of your current enrollment status through the National Student Clearinghouse as well as the new anticipated graduation date from Allegany College of Maryland.
  • First-time federal student loan borrowers will be required to complete Entrance Counseling and sign a Master Promissory Note (MPN) online at www.studentloans.gov .

NOTE: A school can refuse to certify a loan or can certify a loan for an amount less than requested if the school documents the reason in writing. The school's decision is final and cannot be appealed to the U.S. Department of Education.

 

WHAT IS A MASTER PROMISSORY NOTE (MPN)?

The Master Promissory Note (MPN) is a legal document in which one promises to repay loan(s) and any accrued interest and fees to the U.S. Department of Education. It also explains the terms and conditions of your loan(s). Students can borrow additional Federal Direct Loans on a single MPN for up to 10 years. 

Click here to sign your MPN 


HOW WILL FUNDS BE DISBURSED?

ACM will disburse Federal Direct Loan money by crediting the net amount to the student's account to pay tuition, fees, and other authorized charges. If the loan disbursement amount exceeds the student's school charges, ACM will mail a credit refund check to the borrower at the address listed in the Admission/Registration Office.

The Federal Direct Loan will be disbursed in at least two payments; no payment may exceed one-half of the total loan amount. 

NOTES:

  • All First-year, First-time borrowers at Allegany College of Maryland will have the first disbursement held until 30 days from the first day of the semester.
  • If enrolled in a one-semester certificate program, your loan(s) will disburse in two equal installments.
  • If credits in B-term or late start classes are part of your 6 credit hour minimum, loan funds will not disburse until after these classes have started.
  • After your payment has been credited to your account, the Business Office has up to 14 days to issue credit balances or refunds.

 

HOW DO I CANCEL OR REDUCE APPROVED LOAN AMOUNTS?

Students have the right to cancel or change their requested loan amount at any time during the academic year.
Click here to cancel or change your loan now.

 

WHEN DO I BEGIN REPAYING MY LOAN?

You don’t have to begin repaying most federal student loans until after you leave college or drop below half-time enrollment. At that time, you will enter a 6 month grace period.
The grace period is a set period of time after you graduate, leave school, or drop below half-time enrollment before you must begin repayment on your loan. The grace period gives you time to get financially settled and to select your repayment plan.

When your grace period expires, your loan servicer or lender must provide you with a loan repayment schedule that states when your first payment is due, the number and frequency of payments, and the amount of each payment. The standard repayment term is 10 years, although one can get access to alternate repayment terms (extended, graduated and income contingent repayment) by consolidating the loans. 

 

HOW DO I MAKE MY PAYMENTS?

The U.S. Department of Education (ED) uses several loan servicers to handle the billing and other services on loans for the William D. Ford Federal Direct Loan (Direct Loan) Program and for loans that were made under the Federal Family Education Loan (FFEL) Program and that ED later purchased. You’ll tell your loan servicer which repayment plan you’d like to choose.

Click here for a sample repayment schedule estimator

 

Click here for Loan Repayment Guide

 

ENTRANCE/EXIT COUNSELING

Student Financial Aid - Entrance Counseling

Entrance counseling is required by the Federal Government for all new borrowers of Direct Loans. The entrance counseling session takes approximately 30 minutes to complete. It will walk you through the loan process and explain your rights and responsibilities as a loan borrower. The entrance counseling session will explain about Direct Loans, how to manage your educational expenses, your rights and responsibilities as a loan borrower, and other financial resources that may be available to you to help pay for your education.

By completing this online session, you'll meet ACM's entrance counseling requirements. To begin the session, go to www.studentloans.gov and click on the sign in button.

Student Financial Aid - Exit Counseling

Because student loans are legal obligations that you'll have to repay, an exit counseling session is mandatory before you withdraw, drop below half-time attendance, or graduate. Exit counseling provides useful information to help you manage your loans and it helps you, the loan borrower, understand your rights and responsibilities.

The session takes approximately 30 minutes to complete. By completing this online session, you'll meet ACM's exit counseling requirements. To begin the session, go to www.studentloans.gov and click on the exit counseling link under tools and resources. You have the option of beginning the exit counseling session immediately or you may first take a short tour of an exit counseling session.


HOW DO I AVOID STUDENT LOAN PITFALLS?

AVOIDING STUDENT LOAN DEFAULT AND MANAGING YOUR MONEY WISELY 

Definition of Default

Default is a legal term which describes a borrower's failure to repay a loan according to the terms agreed to when he/she signed a promissory note (legal binding promise to repay the  loan). For the Direct Loan Program, default occurs when a borrower fails to make a payment for 270 days under the normal monthly repayment plan.

Tips to Avoid Default

  • Exhaust all other financial resources to help pay your colleges expenses - i.e., ACM scholarships, other outside scholarships,  tutoring/work-study positions or other grants.
  • Only borrow what you absolutely need!  Remember, loans are monies that you have to repay.
  • If you need to borrow loan monies, try and make small payments on your principal balance while you are still in school.  This will lower the amount you need to repay when you graduate.
  • Be sure and stay in contact with your servicer - if you move, get married or experience financial difficulties making your payments, contact your servicer immediately to discuss options.

Consequences of Default

  • The consequences of default are severe: The lender or servicer of your loan and the federal government will normally all take legal action to recover monies you owe including:
  • Notifying national credit bureaus of your default. This may affect your credit rating for as long as seven years. For example, you might find it difficult to borrow money from a bank to buy a car or obtain a mortgage;
  • The Internal Revenue Service can withhold your U.S. Individual Tax Refund and apply it to the amount you owe;
  • The agency holding your loan might ask your employer to deduct payments  from your paycheck;
  • You generally will be liable for loan collection costs - these costs can be huge;
  • If you return to school, you generally will not be eligible for additional federal aid.

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