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Federal Direct Subsidized and Unsubsidized Loans for Students Effective July 1, 2012: Loss of Subsidized Loan Eligibility for Graduate and professional Students and Termination of Direct Loan Borrower Repayment Incentives The Budget Control Act (BCA) of 2011 (Pub. L. 112-25) was signed into law on August 2, 2011. This Act makes two changes to the William D. Ford Direct Loan (Direct Loan) Program: 1. Loss of Subsidized Loan Eligibility for Graduate and Professional Students Effective for loans made for periods of enrollment (loan periods) beginning on or after July 1, 2012, graduate and professional students are no longer eligible to receive Federal Direct Subsidized Loans. The terms and conditions of Direct Subsidized Loans received by any student for loan periods beginning before July 1, 2012, for either graduate or undergraduate study, are not affected by this change. The annual loan limit for graduate and professional students remains unchanged at $20,500 ($47,167 for certain health professions students), but this amount will now be limited to Direct Unsubsidized Loans.
The aggregate loan limit for graduate and professional students remains unchanged at $138,500 ($224,000 for certain health professions students), not more than $65,500 of which may be in subsidized loans.
2. Termination of Direct Loan Borrower Repayment Incentives With one exception as noted below, the BCA terminates the authority of the Department of Education (the Department) to offer any repayment incentives to Direct Loan borrowers to encourage on-time repayment of loans, including any reduction in the interest rate or origination fee, effective for loans first disbursed on or after July 1, 2012. As a result of this change, the up-front interest rebate that has been provided to Direct Loan borrowers at the time of their loan disbursement will no longer be offered on any Direct Loan Program loan with a first disbursement date that is on or after July 1, 2012. The law continues to authorize the Department to offer interest rate reductions to Direct Loan borrowers who agree to have payments automatically electronically debited from a bank account.
Methodist University participates in the William D. Ford Federal Direct Student Loan Program (Federal Direct Loans) for the processing of the Federal Direct Subsidized and Unsubsidized loans. The Federal Direct Subsidized and Unsubsidized Loans are low-interest loans for eligible students to help cover the cost of higher education. In the William D. Ford Federal Direct Loan program, loan proceeds are provided directly from the U.S. Department of Education. There are two types of Federal Direct Loans offered at Methodist University: Federal Direct SUBSIDIZED Loan: Direct Subsidized Loans are for students with financial need as defined by the FAFSA. Undergraduate and graduate students who have unmet financial need can be considered for this loan up to the amount of the student's borrowing limit. The borrower is not charged interest while enrolled in school at least half-time and during grace periods and deferment periods. Federal Direct UNSUBSIDIZED Loan: The borrower is not required to demonstrate financial need to receive a Direct Unsubsidized Loan; however the FAFSA must be completed. The Unsubsidized loan cannot exceed the educational cost of attendance minus other financial aid. Interest accrues (accumulates) on an unsubsidized loan from the time of the first disbursement. The borrower can pay the interest while in school and during grace periods and deferment or forbearance periods, or allow it to accrue and be capitalized (that is, added to the principal amount of the loan). If the borrower chooses not to pay the interest as it accrues, this will increase the total amount repaid because of charged interest on a higher principal amount.
Eligibility for the Direct Loan Subsidized and Unsubsidized As with all federal student aid, to become eligible you must complete the Free Application for Federal Student Aid (FAFSA), the borrower must be a U.S. citizen or eligible non-citizen as defined by the FAFSA, the student borrower must be enrolled or accepted for enrollment in a degree program on at least a half-time basis (6 semester hours) as an undergraduate or graduate student,the borrower must maintain Methodist University's Satisfactory Academic Progress (SAP) for Financial Aid Eligibility and not in default on a previous Federal student loan, Perkins, or Direct Loan. Borrowing Limits Borrowing limits depend on class standing and academic level, and vary for undergraduates, graduate and professional students. Federal Direct Loan Borrowing Limits
* Effective July 1, 2012
Independent Undergraduate: $57,500 (Maximum $23,000 in Subsidized) Graduate or Professional: $138,500 (Maximum $65,500 in Subsidized) Federal Direct Loan Rates
Applying for a Federal Direct Loan (Student) Step 1:New and Returning Students: Complete and submit a Free Application for Federal Student Aid (FAFSA) if one has not been completed at www.fafsa.ed.gov. Direct Loan eligibility is determined by the federal government and reported to Methodist University’s Office of Financial Aid for inclusion on the student’s financial aid award letter. Refer to the borrowing limits chart below for the maximum amount a student can borrow each year, depending on the student’s dependency status (as determined by the FAFSA) and the student’s academic level.
Step 2:New and Returning Students: Sign your award letter and return it to the Office of Financial Aid to confirm the amount of Federal Direct Loans for processing.
Step 3: New Students: Complete the Direct Loan Entrance Counseling at www.studentloans.gov. Once on the site, “Sign In” under the “Manage My Direct Loan” located on the left side of the page. You will need your social security number, date of birth and your Federal Student Aid PIN to sign in (same PIN used to electronically sign the FAFSA); the PIN number is available at www.pin.ed.gov. To complete the Direct Loan Entrance Counseling, select the link titled “Complete Entrance Counseling.” The Department of Education will automatically notify Methodist University of the completed Entrance Counseling. Step 4:New Students: Complete the Direct Loan Master Promissory Note (MPN) at www.studentloans.gov. Once on the site, “Sign In” under the “Manage My Direct Loan” located on the left side of the page. You will need your social security number, date of birth and your Federal Student Aid PIN to sign in (same PIN used to electronically sign the FAFSA); the PIN number is available at www.pin.ed.gov. To complete the Master Promissory Note, select “Complete Master Promissory Note,” then select “Subsidized/Unsubsidized” for the Federal Direct Undergraduate Student Loan. The Department of Education will automatically notify Methodist University of the completed Master Promissory Note (MPN). Please note: Once the loan(s) have been processed, you will receive an updated award letter from MU stating your loan has been processed. Also, once the loan is processed/booked, the loan is assigned a Loan Servicer on behalf of the Department of Education. For a complete listing of Loan Servicers, please visit www.studentloans.gov . Direct Loan Origination fees: The loan origination fee is an expense of borrowing Direct Subsidized/Unsubsidized Loans. The Direct Loan origination fee effective July 1, 2009 will be 1.0% with a Direct Loan up-front interest rebate amount of .5%. The calculation of the combined fee/interest rebate amount reduces the total loan amount paid making the origination fee 0.5% percent. By law, these fees will be subtracted proportionately from each loan disbursement. (More information will be provided during the on-line entrance counseling session). Effective July 1, 2012:the up-front interest rebate that has been provided to Direct Loan borrowers at the time of their loan disbursement will no longer be offered on any Direct Loan Program loan with a first disbursement date that is on or after July 1, 2012. Loan Disbursements The Federal Direct Loan award is issued in multiple disbursements during the academic year. If the borrower plans to enroll for full time in the Day program for the Fall and Spring semesters, the loan will be issued in two equal disbursements (one disbursement per semester). If the borrower plans to enroll with six semester hours in each term for the four terms in the Evening Program (two terms Fall and two terms Spring), the loan award will be issued in four equal disbursements. Due to diverse schedules in the Evening Program, loan disbursements will be determined based upon the number of hours enrolled (the loan disbursement will be set when the student has officially begun the 6th semester hour course). Loan Cancellation/ Reinstatement A student or parent borrower may cancel or reduce a loan anytime before a loan has disbursed to Methodist University. If the loan has already been disbursed and credited to the student’s account in the Business Office, the borrower may cancel a loan within 30 days from the date it disbursed and credited to the student’s Business Office account. A student may reinstate a Federal Direct subsidized (sub) and unsubsidized (unsub) loan at any time prior to the end of the student’s current academic year enrollment. The Federal Parent PLUS for Parents/Graduate students and Alternative Loans MAY NOT be reinstated once reduced or cancelled. Instead, the borrower must reapply online. To reinstate,reduce, or cancel a loan, the borrower must complete the Loan Revision Form. Important Notice: Canceling any loan disbursement could result in a balance to be due on the student's account in the Business Office which the student will be responsible for paying. Repayment after the designated time period Borrowers cannot cancel a loan disbursement if the designated time period described above has already passed. Instead, the borrower can repay the loan disbursement directly by contacting the loan holder which can be found by accessing www.nslds.ed.gov. The borrower will be responsible for any interest that may have accrued and/or any loan fees. Enrolled for less than 6 Semester Hours, Withdrawing or Graduating From MU: Loan Exit Counseling Federal regulations require students who have borrowed a Federal Direct Loan and are graduating, leaving school, or dropping below half-time enrollment to complete an Exit Counseling. During the Exit Counseling, the student borrower will review rights and responsibilities as a student borrower, important information about repaying student loans, consolidation, repayment options, discharge and forgiveness as well as useful information to help manage student loans during repayment. Students may complete the Exit Counseling at the National Student Loan Database (NSLDS) site. NSLDS is a secure central database that stores information on all loans and grants processed though the Department of Education’s federal student aid program. When completing the Exit Interview, the student must provide a permanent address, phone number, employer (if working) and three (3) different references with complete names, addresses and phone numbers. One reference can be a relative. The other two cannot be relatives. This site is created to collect information from schools and lenders so that aid can be more efficiently processed. It is updated every 30-60 days by the schools and the lender(s), so recent disbursements may not show immediately. Ombudsman If a borrower disputes the terms of the Federal Direct Loan in writing and the holder of the loan is unable to resolve the dispute, a borrower may seek the assistance of the Office of Education's Student Loan Ombudsman. The Student Loan Ombudsman will review and attempt to informally resolve dispute and may be reached at 1-877-557-2575 or www.ombudsman.ed.gov Loan Consolidation A Direct Consolidation Loan Program is available that allows a borrower to consolidate (combine) one or more of the eligible federal education loans into one loan. For more details and information, go to www.loanconsolidation.ed.gov.
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The Office of Financial Aid
Related Links
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