Loan Info FAQ
The Federal Department of Education charges an origination fee. Also, the guarantor on your loan may charge a default fee. These fees are deducted from your disbursement amount when it is sent to your school. Some lenders pay these fees on behalf of their borrowers. As of July 1, 2008: For Stafford loans, the origination fee is 1% and the default fee is 1%. For PLUS loans, the origination fee is 3% and the default fee is 1%.
Stafford and PLUS Loan Interest Rates
Subsidized Stafford loans disbursed on or after July 1, 2008 will have a fixed interest rate of 5.95%. Unsubsidized Stafford loans disbursed on or after July 1, 2006 have a fixed interest rate of 6.8%. PLUS loans disbursed on or after July 1, 2006 have a fixed interest rate of 8.5%.
How will the money be disbursed?
Stafford and PLUS loan proceeds are disbursed directly to the school on dates specified by the school. Typically, the first disbursement is made in the fall semester and the second disbursement is made in the spring semester. Different academic schedules may require more than two disbursements.
Repayment begins six months after you graduate or drop below half-time status. The standard repayment term is ten years. Flexible repayment plans are available. Students are required to participate in a Stafford Loan Entrance Counseling session, prior to receiving their first loan disbursement, in which repayment terms and other rights and responsibilities as a Stafford Loan borrower will be explained.
What is a Master Promissory Note (MPN)?
A master promissory note is a legally binding agreement the student signs to obtain a loan under the Federal Family Education Loan Program, in which the borrower promises to repay the loan, with interest, in periodic installments. The agreement also includes information about any grace period, deferment, or cancellation provisions and the student’s rights and responsibilities with respect to the loan. A student may receive multiple subsidized and unsubsidized Federal Stafford loans over a maximum ten year period.
How much can parents borrow in a PLUS loan?
Parents may borrow up to the cost of their student's attendance each year, minus any financial assistance the student is already receiving. Contact the Financial Aid Office if you need help calculating how much your cost of attendance minus financial assistance will be. Your electronic award notice also lists the amount your parent is eligible to borrow in a PLUS loan.
PLUS Loan borrowers enter repayment on the loan within 60 days of the final disbursement of the loan. You will receive repayment information from your lender or servicer shortly after the final disbursement. To obtain an estimate of your monthly payment amount, go to Repayment/Amortization Calculator. Terms of repayment are dependent upon the borrower’s principal balance and may allow up to 10 years to repay. Interest is charged from the date of the first disbursement until the loan is paid in full. If you borrow more than $30,000 through the PLUS Loan program, you can ask for an extended repayment term of 25 years. Contact your lender or servicer upon reaching $30,000 to request the extended repayment term.
What if I would like to cancel my loan?
You may cancel all or a portion of the loan either before the start date of the loan period, or if the loan has already been disbursed after the start date of the loan period, you have 14 days after receiving notification of the loan being credited to cancel all or a portion of the loan. You will receive notification on the student’s billing statement no earlier than 30 days before, and no later than 30 days after, crediting the loan to the student’s account.
