Federal Direct Subsidized and Unsubsidized Student Loans
A federal student loan allows students to borrow money to help pay for college through loan programs supported by the federal government. The loans usually have low interest rates and offer attractive repayment terms, benefits and options. Generally, repayment of the federal loan does not begin until after the student leaves school. The lender is the U.S. Department of Education rather than a bank or other financial institution. The student borrows directly from the federal government and they have a single contact, the Direct Loan Servicing Center, for everything related to the repayment of the loans, even if a Direct loan is received from different schools. The student will have online access 24 hours a day, 7 days a week at www.StudentLoans.gov. A student is able to choose from several repayment plans that are designed to meet the needs of almost any borrower and a student can also switch repayment plans if their needs change.
Federal Direct Subsidized and Unsubsidized Student Loans
There are two types of Federal Direct loans: subsidized and unsubsidized. Subsidized loans provide low interest rates and are available to students who demonstrate financial need based on income and other information provided on the FAFSA. A credit check is not required to receive these loans. The federal government pays the interest on these loans until six months after the student is no longer enrolled in school at least half-time. Unsubsidized loans provide low interest rates and are available to all students regardless of financial need (although the FAFSA still must be filed). A credit check is not required to receive these loans. The student is responsible for the interest, which may be paid while the student is in school or accrued and then added to the principal balance when the student enters repayment, which occurs six months after the student is no longer enrolled in school at least half-time. Families of all income levels are eligible. A student may also qualify for a combination of the two loans up to the maximum loan amounts.
The maximum amount a student can borrow each school year depends on grade level and a number of other factors. The base amount cannot exceed $3,500 for first year dependent undergraduate students and $4,500 for second year dependent undergraduate students. There is an additional $2,000 available in the unsubsidized Stafford loan for each of these grade levels if the student is eligible for the increased amounts. Independent undergraduate students need to discuss any increased loan amounts with the GCC Financial Aid Director. First year students are defined as students who have earned up to 27 credit hours, inclusively. After a student has earned 27 credit hours, they are considered second year students. Loan limits are based on grade levels within the student’s program of study. No student at GCC is considered above second year standing. Students are not required to apply for the full maximum each year. In fact, students are advised to apply for a minimal amount based on actual educational needs.
Federal student loans can be used to pay eligible school expenses such as tuition and fees, room and board, books, supplies and transportation. The cost of attendance for these items is determined by the school and all student loan requests are reviewed on an individual basis. A student may receive less than the maximum loan amounts if the student is receiving other types of financial aid used to cover the cost of attendance, the student does not have some of the expenses listed in the cost of attendance, other resources are being used to pay for the cost of attendance components, the student requests loan money to pay for ineligible costs, the student loan request exceeds allowable costs, etc. GCC can refuse to certify a loan or can certify a loan for an amount less than the student would otherwise be eligible as long as the refusal is documented and it is explained to the student in writing. GCC’s decision is final and cannot be appealed to the U.S. Department of Education.
Students who have borrowed more than $20,000 (includes past loan history at other institutions) in Federal student loans will be required to submit an academic plan outlining their courses by semester, anticipated graduation date, and future loan borrowing. The academic plan must be approved by the Director of Financial Aid before any loan funds will be granted.
All students receiving loan funds are required to participate in both entrance and exit counseling. Entrance counseling takes place prior to the first disbursement of the loan and exit counseling is conducted prior to or at the time the student borrower ceases enrollment. Student loan counseling discusses information regarding the responsibilities of indebtedness, repayment options and consequences should the student fail to repay the loan. Student loan counseling is an online process with the U.S. Department of Education at www.StudentLoans.gov. Exit counseling packets are mailed to all students with instructions on the exit counseling process. The deadline date for processing loans for first semester is November 15 and April 15 for second semester.
GCC will disburse student loans in at least two installments. No installment will be greater than half of the amount of the loan. First year students borrowing for the first time will not have their loans disbursed until 30 days after the first day of the enrollment period for the student. Student loan money must first be used to pay for tuition, fees, books and room and board, if applicable. If loan funds remain, the balance will be disbursed to the student. Students need to be attending their classes and enrolled at least half-time in order to receive their loan funds. If a student is not attending their classes, the individual student will be contacted and the withdrawal process may need to begin.
Student loans, unlike grants and work-study, are borrowed money that must be repaid, with interest, just like car loans and home mortgages. Students cannot have these loans canceled because they didn’t like the education they received, didn’t get a job in their field of study or because the student is experiencing financial problems. Loans are legal obligations, so before a student decides to take out a loan, they need to think about the amount they will need to repay over the years. The recipient of a student loan must recognize that such a loan is a debt incurred by the student, not the parents. The responsibility for understanding the conditions and regulations of the loan process, as well as the repayment schedules, rests with the student borrower. Students can find out more about student loans at www.FederalStudentAid.ed.gov by clicking on Student Aid on the Web/Apply for Financial Aid/Funding Your Education While Attending School.
All students must fill out the FAFSA to determine loan eligibility as well as submit a Master Promissory Note (MPN) and the Federal Direct Student Loan Request Form. Loan application materials can be obtained from the GCC Financial Aid Office.
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