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Federal Direct Loans are low-interest loans for students and parents to help pay for the cost of a student's school. The lender is the U.S. Department of Education rather than a bank or other financial institution. Student and Parent Plus Loans are borrowed funds so unlike grants and work-study funds, loans must be repaid with interest. Before you borrow, consider carefully how much you will need to borrow and the burden your loans will impose after you leave school. The Financial Aid Counselors in the Financial Aid Office at USCB can provide you with more information on the responsibilities you assume when you borrow money.
Because loans must be repaid, it is important to consider the amount of monthly payments that your total borrowing will require. Some students at USCB will graduate with no debt while others will borrow heavily. The average amount borrowed for USCB students for the 2009-10 academic year was $6,350. At a 6.8 percent interest, your monthly payment would be approximately $74.80 with a ten-year payment plan, if you borrow this amount.
There are two types of Federal Direct Loans
Subsidized Federal Direct Loan
A subsidized Federal Direct Loan is awarded based on financial need and accrues no interest while the student is enrolled in school at least half-time, during the grace period or during periods of deferment.
Unsubsidized Federal Direct Loan
An unsubsidized Federal Direct Loan is not dependent upon need. Interest accrues from the time the loan is disbursed until final payment. The student has the option to make interest payments while in school and during the grace period.
For the period of July 1, 2016 through June 30, 2017, the following interest rates are in effect:
- 3.76% fixed rate on an undergraduate Subsidized Federal Direct Loan
- 3.76% fixed rate on an undergraduate Unsubsidized Federal Direct Loan
- 6.31% fixed rate on Parent Loan for Undergraduate (Dependent) Students (Parent PLUS Loan)
If you indicate on the FAFSA that you are interested in loans, we will automatically consider you for both subsidized and unsubsidized Federal Direct Loans, first awarding the maximum subsidized amount, then the maximum unsubsidized amount according to program limits and your eligibility. First-time borrowers must complete entrance loan counseling and sign a promissory note with the U.S. Department of Education online at https://studentloans.gov prior to disbursement of funds.
Annual Maximum Loan Amounts
The Federal Direct Loan program provides up to $5,500 for the first year of undergraduate study, $6,500 for the second year, and $7,500 per academic year for upperclassmen. The Unsubsidized Direct Loan provides increased annual maximums for independent students (and some dependent undergraduates if a parent is denied a PLUS loan) up to $9,500 for the first year of undergraduate study, $10,500 for the second year, and $12,500 per academic year for upperclassmen.
Federal regulations require the limitation or reduction of the amount of an unsubsidized or subsidized Federal Direct Loan under certain prescribed conditions. These conditions are as follows: (1) the borrower is an undergraduate, applies for a Stafford Loan and is enrolled less than a full academic year (fall and spring semesters) or (2) the borrower will complete all degree requirements at the end of the semester or term. If both of these conditions occur, the Direct Loan amount may be reduced and the borrower will be sent notification to review the revised award letter on VIP.
If a Direct Loan is processed for the full academic year (Fall and Spring), half of the loan will be disbursed at the beginning of the Fall semester and the second half will be disbursed at the beginning of the Spring semester. You must also sign your promissory note before loan processing will be completed.
Federal Direct Parent Loan for Undergraduate Students (PLUS)
Federal Parent Loan for Undergraduate Students (PLUS) provides long-term loans to parents for their dependents from the U. S. Department of Education (DOE). Loan amounts under this program are limited to the student’s cost of education minus other financial aid awards. Parents may be denied a PLUS loan due to adverse credit history. If the PLUS Loan is denied, the student is eligible for an additional Unsubsidized Stafford Loan.
For parent PLUS Loans, repayment begins within 60 days after the loan is fully disbursed or parents may request a deferment for repayment until six months after the dependent student ceases to be enrolled on at least a half-time basis by contacting DOE directly. The repayment period can be extended up to 10 years with minimum monthly payments to be arranged with the DOE.
PLUS Loans will be disbursed in at least two installments, generally to coincide with the beginning of the enrollment period covered by the loan. Equal installments of your loan will be disbursed at the start of each semester if your loans cover multiple semesters. A loan that covers only one semester or term, however, will be disbursed in full at the beginning of the semester or term. The Bursar’s Office handles the disbursement of all Plus Loans and can be contacted regarding the details of disbursement. Parents and students are advised to exhaust their eligibility for other federal student aid programs before considering the Plus Loan.
Parents can apply for a Parent Plus Loan online at: https://studentloans.gov. Parents will need to complete the Plus Default/Overpayment Parent Borrower Statement and return it to the Office of Financial Aid/VA before funds can be disbursed. Parents will also need to complete the Parent PLUS Loan Fee Authorization Form and return it to the Business Office (Office of the Bursar), so that the funds can be applied to the entire bill.
For more information on student/parent loans regarding interest rates and repayment calculators, loan repayment plans, cancellation and consolidation, etc., visit the Department of Education’s website: Click here
South Carolina Teachers Loan Program provides loans in amounts up to $2,500 for the first and second years of undergraduate study and $5,000 per academic year for upperclassmen and graduate students. Loan indebtedness will be cancelled at the rate of 20% or $3,000, whichever is greater, for each year of full-time teaching in a critical subject or critical geographic area in South Carolina. If you teach in both a critical subject and geographic area simultaneously, your loan shall be cancelled at the rate of 33 1/3% or $5000, whichever is greater, for each full year of full-time teaching. The subject areas deemed critical at the time you apply will be honored for cancellation when you begin teaching; critical geographic areas must be deemed critical at the time of employment. If you decide not to teach, the interest rate shall be the rate on the Federal Stafford Loan plus 2%. This is a variable rate not to exceed 10.25% annually.
Career Changers Program
The Career Changers Program provides loans to individuals wishing to enter the teaching profession. The program provides annual loan amounts of $15,000, up to a cumulative amount of $60,000. Loan indebtedness will be cancelled at the rate of 20% or $3,000, whichever is greater, for each year of full-time teaching in a critical subject or critical geographic area in South Carolina. If you teach in both a critical subject and geographic area simultaneously, your loan shall be cancelled at the rate of 33 1/3% or $5,000, whichever is greater, for each full year of full-time teaching. The subject areas deemed critical at the time of application will be honored for cancellation when you begin teaching; critical geographic areas must be deemed critical at the time of employment. If you decide not to teach, the interest rate shall be the rate on the Federal Stafford Loan plus 2%. This is a variable rate not to exceed 10.25% annually.
Teacher Loan Forgiveness
The Teacher Loan Forgiveness Program is intended to encourage individuals to enter and continue in the teaching profession. Under this program, if you teach full-time for five complete and consecutive academic years in certain elementary and secondary schools and educational service agencies that serve low-income families, and meet other qualifications, you may be eligible for forgiveness of up to a combined total of $17,500 on your Direct Subsidized and Unsubsidized Loans and your Subsidized and Unsubsidized Federal Stafford Loans. If you have PLUS loans only, you are not eligible for this type of forgiveness. To learn more, visit Studentaid.ed.gov