1. Loan Basics Kimberly Schwaeble Assistant Director, Rice University
Julie Wittmis
Financial Aid Advisor, Texas Woman’s University
New Aid Officers’ Workshop
2017

2. Agenda Student loan programs and regulations
Application process and eligibility
Repayment options

3. Federal Student Loans Federal Direct Subsidized Loan
Federal Direct Unsubsidized Loan
Parent PLUS Loan
Graduate PLUS Loan
Federal Perkins Loan

4. Federal Direct Subsidized Loan
Need based loan for undergraduates only
Origination fee: 1.069% (as of October 2016)
Fixed interest rate: 3.76% (as of July 2016)
July 1 rate is adjusted for new loans
Grace period: 6 months
Interest does not accrue – paid by Dept. of Ed – when…
Enrolled at least half time
During 6 month grace period
If loan was first disbursed between July 1, 2012 and July 1, 2014, you will be responsible for paying any interest that accrues during your grace period.
During other times of deferment
Must meet SAP and enroll at least half time

5. 150% Subsidized Usage Limit Applies (SULA)
Effective 7/1/13 and applies to new borrowers or borrowers with a zero balance taking out a new loan
May only receive Sub for 150% of the published program length
MEP-SUP=REP
Maximum eligibility period (MEP)
Subsidized usage period (SUP)
Remaining eligibility period (REP)

6. 150% Subsidized Usage Limit Applies (SULA)
Eligibility lost after students exceeds MEP
Cannot receive any more sub
May receive unsub up to yearly limit in its place
Interest subsidy lost on outstanding Direct Subsidized Loans (including Direct Consolidation Loan that repaid a Direct Subsidized Loan) if borrower attends undergrad program at least half-time when remaining eligibility period is zero or less.

7. Federal Direct Unsubsidized Loan
Non-need based loan
Borrowers are undergrad, grad, or professional
Origination fee: 1.069% (as of October 2016)
Fixed interest rate: 3.76% undergrad, 5.31% grad (as of July 2016)
Grace period: 6 months
Interest accrues while student is in school
Interest capitalizes
Student can elect to pay interest while enrolled
Must meet SAP and enroll at least half time

8. Dependent Undergraduate Student
Base Eligibility
(Sub or Unsub)
Additional Unsubsidized Loan
Freshman
$3,500
$2,000
Sophomore
$4,500
Junior/Senior
$5,500
$2000
Maximum Total (Aggregate) Limit:
$31,000 ($23,000 can be subsidized)
Independent Undergraduate Student
Base Eligibility
(Sub or Unsub)
Additional Unsubsidized Loan
Freshman
$3,500
$6,000
Sophomore
$4,500
Junior/Senior
$5,500
$7,000
Maximum Total (Aggregate) Limit:
$57,500 ($23,000 can be subsidized)
Graduate/Professional Student
Unsubsidized Loan
$20,500/academic year
Maximum Total (Aggregate) Limit:
$138,500 ($65,500 may be subsidized)

9. Parent PLUS Loan Non-need based loan
Can borrow up to cost of attendance (COA) minus other aid
Borrower is parent of dependent undergrad
Student must be enrolled at least half time
Origination fee: 4.276% (as of October 2016)
Fixed interest rate: 6.31% (as of July 2016)
Credit check required
Additional PLUS loan counseling required for low credit
Additional unsub up to independent limit may be awarded if parent does not pass credit check
Repayment begins after loan is fully disbursed

10. Graduate PLUS Loan Non-need based loan
Can borrow up to COA minus other aid, no aggregate limit
Borrower is graduate or professional student
Origination fee: 4.276% (as of October 2016)
Fixed interest rate: 6.31% (as of July 2016)
Credit check required
Loan payments deferred while at least half time
6 month grace period, interest continues to accrue
Must be enrolled at least half time

11. Direct Loan Application Process
FAFSA
Eligible student in eligible program with Pell eligibility determination complete
Entrance counseling
First time borrowers informed of their rights and responsibilities
Completed at

12. Direct Loan Application Process
Master Promissory note
Includes terms and conditions of the loan disbursement and repayment
Valid for 10 years and covers multiple loans
Completed on
Exit Counseling
Information on repayment
Must be complete when student drops below half-time or graduates
Completed on
PLUS loan application at

13. Direct Loan Notification
Institution is required to notify the borrower within 14 days after disbursement is made and give the borrower the opportunity to reduce or cancel the disbursement.

14. ------------------------------
Direct Loan Proration
Applies to subsidized and unsubsidized loans
Required if:
Student’s academic program is less than 1 year in length
Student’s remaining period of study is less than 1 year in length
Standard proration formula:
Actual enrolled hours 24
Amount of direct loan
X student could
have for grade level

15. Perkins Need based loan Borrower is undergrad, grad, or professional
No origination fee
Fixed interest rate: 5%
Interest does not accrue while in school or grace
Grace period: 9 months
Institution is lender and servicer
Must meet SAP and enroll at least half time

16. Perkins Annual Limit: $5,500 undergrad, $8,000 grad/prof
Lifetime Limit: $27,500 undergrad, $60,000 grad/prof
Maximum repayment period is 10 years
Program ending Sept. 30, 2017
See DCL GEN for specifics (

17. Alternative Loans Non need based loans
Private banks
State loans (College Access Loan, *B-On-Time Loan)
Fees, interest rates, terms vary
Most require school certification
May require credit check or cosigner
* No new borrowers for B-On-Time Loan

18. Student Loan Repayment
Single source with record of all federal loans
Borrower info
Loan amounts
Interest accrued
Servicer info

19. Repayment Plans Standard – 10 years; equal monthly payments
Graduated – 10 years; monthly payments start low and increase every 2 years
Income sensitive repayment – monthly payments based on annual income and change as income changes
Extended – 25 years; fixed or graduated monthly payments

20. Repayment Plans
Income contingent – payments based on annual calculations and adjusted so as not to cause “undue hardship” (25 yr forgiveness)
Income Based – monthly payments will not exceed 15% discretionary income (25 yr forgiveness)
Pay As You Earn – monthly payments will not exceed 10% of discretionary income (20 yr forgiveness); must be new borrower on or after 10/1/07
Revised Pay as You Earn – monthly payments will not exceed 10% of discretionary income (20 yr forgiveness); date limitation does not apply

21. Loan Forgiveness
Teacher Loan Forgiveness – up to $17,500 on sub or unsub (Direct or Stafford) loans if teach full-time for 5 complete consecutive years in certain elementary/secondary schools serving low-income families
Public Service Loan Forgiveness – forgives the remaining balance on Direct Loans after 120 qualifying monthly payments made while working full-time for qualifying employer

22. Loan Repayment Terms
Forbearance – Period of time payments are postponed, reduced or extended
Interest accrues
Deferment – Period of time payments are postponed for approved set of reasons
Interest on subsidized loans does not accrue*
Default – payments delinquent for 270 days
Consolidation – Combines loans into one, requiring one monthly payment to one servicer
Can fix defaulted loan

23. Cohort Default Rate (CDR)
Includes Direct Loans and loans underlying DL consolidation loans
CDR = % of borrowers who enter repayment in a given federal fiscal year who then default within the next 3 fiscal years
High rate has consequences for schools
>15% = loss of 1 installment/semester
>15% = 30 day hold on 1st time, 1st year borrowers
>40% = loss of participation in Title IV funding

24. Resources Studentaid.gov IFAP – ifap.ed.gov
FAQs broken down by loan type
Repayment calculators
IFAP – ifap.ed.gov
Handbooks, regulations, current notifications
This site is your best friend! 
YouTube – FederalStudentAid channel
Videos on a variety of topics including repayment

25. Questions?