Subsidized direct loans are available for students with financial needs. The university determines the amount of the loan you may receive, but this amount cannot exceed your calculated financial need. When you get a subsidized direct loan, the U.S. Department of Education pays the interest. This happens during the time you are studying at least part-time; during the six months after leaving the university (known as the grace period*); and during an extension period (temporarily stopping the loan payments).
These loans are available for undergraduate and graduate students who are not required to demonstrate financial need. The loan without subsidy is offered at the student’s request, and the amount disbursed will depend on the student’s eligibility, and according to his/her academic year, and his/her status as independent from or dependent on the parents. You will be responsible for paying all interests of the direct loan at all times. If you decide not to pay the interests while you are studying, or during the grace or extension periods, these interests will accrue and capitalize (meaning, they will be added to your debt principal).
PLUS direct loans are federal loans for graduate students or students in higher professional studies, as well as for parents of dependent undergraduate students that want to use these funds to pay for education expenses. Here’s a short explanation of PLUS direct loans:
- The U.S. Department of Education is the lending entity.
- The borrower cannot have an adverse or negative credit history.
- Loans have a fixed interest rate of 5.3%.
- The maximum amount of the loan is equal to the cost of your tuition (as determined by the institution), minus any other financial aid received.
To get a PLUS direct loan, you need to:
- Be a graduate student or be taking higher education professional courses and be enrolled at least part-time in a program conducive to a degree or certificate in a participating institution, or be the father or mother (biological, adoptive or, in certain cases, the stepfather or stepmother) of a dependent undergraduate student who is enrolled at least part-time in a participating institution.
- Meet the general requirements to obtain federal financial aid. If you are getting a loan in your child’s name, your child must also meet these requirements.
More details about the PLUS direct loans:
To obtain a PLUS direct loan, you (or your child, if it’s a parent obtaining the loan) need to fill out the Free Application for Federal Student Aid (FAFSA). The university’s Financial Aid Office will provide instructions on how to apply for a PLUS loan.
A verification will be done during the application process. If you have an adverse or negative credit history, you could still obtain a PLUS loan if you get a co-signer who does not have a negative credit history, or if you can show evidence to the U.S. Department of Education regarding the attenuating circumstances related to your negative credit history. If you are a parent taking out the loan, the child for whom you are getting the loan cannot be the co-signer
If the parent cannot obtain a PLUS direct loan, the undergraduate dependent student may be eligible to get other non-subsidized loans to help him/her with his/her education. The dependent student should contact the Financial Aid Office to get more information.
If you meet the requirements to obtain a PLUS direct loan, you will be required to sign a Master Promissory Note or MPN, by which you accept the terms and conditions of the loan. If you are a graduate student or are taking higher education professional courses, you will also be required to complete the entrance counseling process before getting your PLUS direct loan.
The maximum amount of the loan is equal to the cost of your tuition (as determined by the institution), minus any other financial aid received. These loans have a fixed interest rate of 5.3%. There is an origination fee of 4.228% for all PLUS direct loans. This amount will be deduced proportionally for each loan disbursement.
The institution will credit all your PLUS loan funds, first, to your account in the institution that is used to pay for tuition, cuotas, food and housing, and other charges. If there are excess funds from the loan, your institution will refund them to you to help you with other education expenses.
When you receive your PLUS loan, your loan administrator will contact you. Your loan administrator will provide you updated information periodically regarding the status of your PLUS loan and will inform you as to how and when you will need to pay back the loan.
You will need to start paying your PLUS direct loan once the total amount of your loan is disbursed. However, if you are a graduate student or are taking higher education professional courses, you will be given an extension while you’re studying at least part-time, and during an additional six-month period after you are no longer enrolled.
If you are a parent obtaining the loan, you may contact your loan administrator to request an extension:
- While your child is enrolled at least part-time.
- During an additional six-month period after your child is no longer enrolled at least part-time.
If you are granted an extension, your loan will accrue interests during this period. You may choose to pay the interests accrued or let them capitalize at the end of the extension period. Your loan administrator will inform you when the first payment is due.
There are different payment plans designed to meet the individual need of borrowers.
If you cannot pay your loan as planned, contact your loan administrator immediately so he/she can explain your options to stay current on your payments. For example, you may change your payment plan, or request an extension that could allow you to suspend payments for a certain amount of time, or lower you loan payments.
If you obtained a PLUS direct loan as a parent, you may not transfer the loan to your child. You, as a parent, are responsible for paying the loan.
Before the loan is disbursed, you may cancel part of or the entire loan by notifying the institution. Once the loan is disbursed, you may cancel part of or the entire loan during certain time periods. Your institution will provide you your payment and other loan information and will explain the procedures and time periods to cancel your loan. You may also be eligible to have part of or the entire loan condoned if you meet certain conditions. You must pay your loans, even if you do not finish your degree, if you cannot find work in the field related to your academic program, or if you are not satisfied with the education you received in exchange for the loan requested. However, under certain conditions, your loans may be condoned, cancelled, or annulled.
The institution will credit all your PLUS loan funds, first, to your account in the institution that is used to pay for tuition, quotas, food and housing, and other charges. If there are excess funds, they will be reimbursed to you in a check. All funds from the loan must be used to pay for education expenses.
Once you get your direct loan, your loan administrator will contact you (you will pay your loan to the loan administrator). The loan administrator will provide you updated information periodically regarding the status of your PLUS loan, as well as any other direct loans you may receive.
Once you graduate, leave school, or stop being enrolled at least part-time, you will have a six-month grace period before you start making payments on the loan. During this time, your loan administrator will provide you information related to paying back the loan and when the first payment is due. Payments are normally made monthly.
There are several payment options designed to meet the individual needs of borrowers. Your loan administrator can explain the payment options you may have available. Generally, you will have 10 to 25 years to pay back your loan, depending on the plan you choose.
If you cannot pay back your loan as planned, contact your loan administrator immediately, so he/she can explain the options you may have to stay current with your payments. For example, you may change your payment plan to lower your monthly payments, or you may request an extension (or delay) to suspend payments for a period of time.
You can cancel your entire loan or part of it anytime.
Under certain circumstances, you may be eligible to have part or the entire amount of you loan annulled or condoned (cancelled).
To apply for any of these loans, you need to be enrolled at least part-time in an institution participating in the direct loan program. Generally, you need to be enrolled in an academic program conducive to a degree or certificate given by the institution. Subsidized direct loans are only available to undergraduate students with financial needs. Non-subsidized direct loans are available to undergraduate students, and to graduate students or students taking professional courses. Demonstrating financial need is not necessary to obtain a non-subsidized direct loan.
If it’s the first time you apply for a loan, and you do so on the 1st of July 2013, or afterwards, a maximum time period will apply (measured in academic years) during which you may obtain subsidized direct loans. This time limit does not apply to non-subsidized direct loans, nor to PLUS loans. If this time limit applies to you, you will not be able to obtain subsidized direct loans during more than 150% of the duration of your academic program. This is known as the “maximum allowable time”. Your maximum allowable time is based on the duration of your academic program. You may find this information in the university’s catalog.
For example, if you are enrolled in a four-year Bachelor’s program, the maximum allowable time during which you may obtain subsidized direct loans is three years (150% of 2 years = 3 years).