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Top 10 Questions About Federal Direct Loans:

 

1. LENDER: SVSU is a Direct Lending school. In the Direct Loan program, the U.S. Department of Education currently has a group of loan servicers and more are added as necessary. The loans are the same and have the same options, no matter what servicer your loan is assigned to. The federal government will assign all of a student’s Federal Direct Loans to the same servicer when possible. A student can verify his/her loan servicer and gather contact information at www.nslds.ed.gov.

2. DISBURSEMENTS:
Federal Direct Loans are typically sent in 2 disbursements. One for the Fall semester and one for the Winter semester. One semester only loans have only one disbursement. The earliest a Direct Loan can be disbursed to the school is 10 days before the semester begins. Once the school receives the disbursement, it is processed, disbursed to the student account to pay for any institutional charges necessary, and the remainder is then refunded within 14 days.

3. INTEREST RATE: Direct Subsidized Loans are interest-free while the student is in school at least half-time. Undergraduate Direct Unsubsidized Loans currently have a fixed interest rate of 4.66% (7/1/14-6/30/15). Graduate Direct Unsubsidized Loans currently have a fixed interest rate of 6.21% (7/1/14-6/30/15). Interest starts as soon as the first disbursement happens. Students receive quarterly interest statements from Direct Loans. Students do not have to pay this balance, but are encouraged to do so. If the interest is not paid, it is capitalized with the principal upon repayment. What does that mean? The student would pay interest on the interest. More information.

4. PROCESSING FEE: There is a processing fee assessed to all Direct Loans by the federal government. This means the funds the institution receives for the student loan is a certain % less than what the loan was taken out for. As of December 1, 2013, these fees are 1.072% for Federal Direct Subsidized/Unsubsidized Loans and 4.288% for Federal Direct PLUS Loans.

5. GRACE PERIOD: Students have one 6-month grace period for every loan. If a student leaves school and returns, they can have their loans deferred again. However, a student only gets one grace period. Students should contact their lender. (See “Repayment” below.)

6. ENROLLMENT STATUS: Students must be at least half-time to be eligible for a Federal Direct Loan. This is determined by the school’s half time policy. SVSU defines half-time as 6 credits for undergraduate and 5 credits for graduate students.

7. REPAYMENT: Typically, if students consolidate their Federal Direct Loans, Direct Loans will take the average of all their interest rates and figure one monthly loan payment based on that calculation. Therefore, because the in-school interest rate is lower, it is more beneficial to consolidate while in school or in the grace period. WARNING: Consolidating loans before the grace period or during the grace period can force a student to have a shorter grace period or lose the grace period all together. Students should contact their loan servicer or go to the servicer’s website for more specific information. Consolidation of Direct Loans can currently be done at www.studentloans.gov. Students can also log onto www.nslds.ed.gov for their aggregate loan amount and to see what servicer they are assigned to. What does that mean? The student can see all the Federal Student Loans they have taken out - it's the total amount borrowed.

8. LOAN COUNSELING: Students must complete entrance loan counseling before a loan is disbursed. This is available at www.studentloans.gov. Students typically need to complete this only one time at a school, but some situations may cause this to be required again if there has been a lapse in attendance.
PROMISSORY NOTE: SVSU will send a letter to the student if a promissory note is needed. Students must complete a promissory note at www.studentloans.gov before a loan is fully processed. The student will need to read, review, and electronically sign the promissory note (student should obtain a PIN at www.pin.ed.gov, if the student does not already have one). Students typically need to complete this only one time at a school, but some situations may cause this to be required again if there has been a lapse in attendance. Each Master Promissory Note is good for a 10-year period.

9. FIRST-TIME BORROWERS: First-time freshmen borrowers have a first-disbursement date 30 days after the semester begins.

10. LOAN LIMITS: Federal Direct Loans are regulated by yearly and aggregate (total) loan limits. These are as follows:

Dependent Students:

 Independent Students: 

 

Class Level 

Yearly Loan Limit

Aggregate

Yearly Loan Limit

Freshmen
(0-30 credits)

$5,500
(up to $3,500 can be subsidized, if eligible)

$31,000
($23,000 subsidized)

$9,500
(up to $3,500 can be subsidized, if eligible)

$57,500
($23,000 subsidized)

Sophomore
(31-61 credits)

$6,500
(up to $4,500 can be subsidized, if eligible)

 

$10,500
(up to $4,500 can be subsidized, if eligible)

 

Junior/Senior/
2nd Bachelors
(62+ credits)

$7,500
(up to $5,500 can be subsidized, if eligible)

 

$12,500
(up to $5,500 can be subsidized, if eligible)

 

Teacher Certification

$5,500
(subsidized and/or unsubsidized)

 

$12,500
(up to $5,500 can be subsidized, if eligible)

 

Graduate

   

$20,500
(unsubsidized only)

$138,500