What Is A Federal Student Loan?

A Federal Student Loan is a Student Loan that is funded by the federal government to help you pay for your education. These loans are quantities of money borrowed from the federal government that must later be repaid with interest.

Types of Student Loans

Direct Subsidized Loan

Subsidized loans are available to undergraduate students who demonstrate financial need (based on the FAFSA).  If you are eligible, as determined by the Federal Government, UAA will determine the amount of subsidized loan you can borrow, based on Cost of Attendance and other forms of financial aid received.  The amount may not exceed your financial need. Before any money is disbursed from a subsidized loan, the borrower must complete Entrance Counseling and a Master Promissory Note on www.studentloans.gov, which are valid for 10 years.  Once the borrower is no longer enrolled half-time, Exit Counseling must also be completed on www.studentloans.gov.  If you borrow this type of loan, the interest will be payed by the U.S. Department of Education during the following periods:

  • while you’re in school at least half-time;
  • for the first six months after you leave school (referred to as a grace period*);
  • and during a period of deferment (a postponement of loan payments).

*Note: If you received a Direct Subsidized Loan that is first disbursed between July 1, 2012 and July 1, 2014, you will be responsible for paying any interest that accuses during your grace period. If you choose not to pay the interest that accrues during your grace period, the interest will be added to your principal balance.

Direct Unsubsidized Loan

Unsubsidized loans are available to undergraduate students and do not require demonstration of financial need. If you are eligible, UAA will determine the amount of unsubsidized loan that you can borrow based on Cost of Attendance, and other forms of financial aid received. Before any money is disbursed from an unsubsidized loan, the borrower must complete Entrance Counseling and a Master Promissory Note on www.studentloans.gov.  Once the borrower is no longer enrolled half-time, Exit Counseling must also be completed on www.studentloans.gov. If you borrow an unsubsidized loan, you will be responsible for paying the interest during all periods (from the time the loan is disbursed until it is completely paid off).  If you choose not to pay the interest while you are in school and during grace periods and deferment or forbearance periods, your interest will accrue (accumulate) and be capitalized (your interest will be added to the principal amount of your loan).

Direct Parent PLUS Loan

Parent PLUS loans are available to the parent (biological, adoptive, or stepparent) of a dependent undergraduate student (as determined on the FAFSA, not your Federal Income Taxes) who is enrolled at least half-time at a participating school. A credit check of the parent borrower is required.  Before any money is disbursed from a Parent PLUS loan, the parent borrower must complete a Master Promissory Note on www.studentloans.gov.  If you are eligible, UAA will determine the amount of this loan that the parent can borrow based on Cost of Attendance and any other financial aid received. If you borrow this type of loan, you will be responsible for paying the interest during all periods.  

Direct Graduate PLUS Loan

Graduate PLUS loans are available to graduate or professional degree students enrolled at least half-time in a degree or certificate program. . If you are eligible, UAA will determine the amount of this loan that you can borrow based on Cost of Attendance, and any financial aid received. Before any money is disbursed from a Graduate PLUS loan, the borrower must complete Entrance Counseling and a Master Promissory Note on www.studentloans.gov.  Once the borrower is no longer enrolled half-time, Exit Counseling must also be completed on www.studentloans.gov.  If you borrow this type of loan, you will be responsible for paying the interest during all periods.  A credit check is required.

 

ALL Loan Borrowers:

Your loan will be submitted to National Student Loan Data Services (NSLDS) and accessible by authorized agencies, lenders, and institutions.

 

Direct Federal Loan Requirements

 

FAFSA Required

Loan Entrance Counseling

Promissory Note

Credit Check

Enrollment Status (Half time or more^)

Subsidized (undergraduate)

YES

YES

YES

NO

YES

Unsubsidized

YES

YES

YES

NO

YES

Parent PLUS

YES

NO

YES/By Parent

YES

YES

Graduate PLUS

YES

YES

YES

YES

YES

More info about Sub/Unsub Loans

More info about PLUS loans

^Half-time is 6 credits undergraduate and 5 credits graduate


 
 

Loan Limits

There are limits to the amount of student loans that you can borrow. An Aggregate Loan Limit refers to the total amount of money in student loans that you can borrow over your lifetime. An Annual Loan Limit refers to the maximum amount of federal loans you can receive in an award year.

Aggregate

A dependent undergraduate student is allowed a total of $31,000, with a maximum of $23,000 in subsidized loans. An independent undergraduate student is allowed a total of $57,500, with a maximum of $23,000 in subsidized loans. A graduate student is allowed a maximum of $138,500 in federal loans.

Annual

A student's grade level and dependency status on the FAFSA determines the maximum amount of federal loans they can receive in an award year. The following chart lists how much dependent and independent students can borrow based on their student standing (freshman, sophomore, junior, senior). Student standing is determined by the number of credits that a student has completed. Award amounts are based on the student's grade level at time of award, and will not be adjusted mid-year unless they elect a new program of study.

 

Grade Level

# of Credits Completed

Annual Max:
Dependent Undergrad

Annual Max:
Independent Undergrad

Freshman

0-29

$5500.00,
maximum $3500.00 in
subsidized federal loans

$9500.00,
maximum $3500.00 in subsidized federal loans

Sophomore

30-59

$6500.00,
maximum $4500.00 in
subsidized federal loans.

$10,500.00,
maximum $4500.00 in subsidized federal loans.

Junior* /Senior*

60-89 /90-120

$7500.00,
maximum $5500.00 in
subsidized federal loans.

$12,500.00,
maximum $5500.00 in subsidized federal loans.

Graduate students

Master's degree or certificate

Independent only

$20,500.00 in unsubsidized federal loans.

* Junior/Senior standing requires a student be enrolled in a Bachelor's degree. Students in Associates degree programs cannot be considered more than a sophomore, regardless of the number of credits they've completed.
 

Repayment

Once you are no longer in school half-time, due to graduation, time off, withdrawing, or any other reason, you will have a 6-month grace period before you must start repaying your loans(s).  After your grace period, your loan will move into repayment status and you must begin making payments.  There are several options for repayment available, depending on your financial circumstances and the federal programs currently available.   You can find out more information on repayment options at  https://studentaid.ed.gov/repay-loans/understand/plans .

To set up repayment of your Federal Direct student loans, go the website of your loan servicer to set up an account and make payments.  You can find out who your loan servicers are for any Federal loans you have borrowed on www.studentloans.gov  or www.nslds.ed.gov.

You can make payments on your loan at anytime.  You do not have to wait until you go into repayment status.  Even if you choose to make payments on your loan while you are still in school and in deferment status, you will not be required to make payments.  You are strongly encouraged to make any payments you can while in school to reduce your overall cost of the loan with interest charges.

Not making payments on your loan(s) or requesting and confirming a forbearance with your loan servicer can have hugely detrimental effects on your financial future.  If you need help navigating your loan repayment, please contact UAA’s Financial Literacy Specialist at 907-786-6149.

 

Common Loan Lingo

Borrower Benefits: Not all lenders are the same. Some will reduce up-front fees or not charge them. They may reduce your interest rate automatically when you begin repayment or they may reduce your interest rate for having loan repayments auto-debited. Your best bet is to compare lenders to get the best deal.

Cancellation: Your loan is canceled because of things like no monies being disbursed to the borrower; the lender’s check was never cashed; the loan was repaid within 120 days after being transferred to the account, etc.

Default: To default on your loan means your federal loan is 270 days or more past due.

Default Fees: Default fees are the late fees your lender (or guarantor) charge you when your loan is in default.

Deferment: Is postponing the repayment of your student loan for a period of time, usually because of unexpected economic hardship. You must apply for a deferment – it is not automatic. Contact your lender for specifics for your loan.

Delinquency: This is when you fail to make your monthly loan payments when they are due. Delinquency begins with the FIRST missed payment.

Disbursement: When your loan monies are release to the college for delivery to the borrower (student).

Forbearance: This is a temporary hold of your regularly scheduled repayment of your student loan, or being permitted to make smaller payments then what was originally scheduled on the loan agreement. You are usually still responsible for the entire amount of interest accrued during this time. This must be arranged with your lender – it is NOT automatic!

Grace Period: This is a specific time period between the date the student graduates (or drops below half-time enrollment status), and when they must begin repaying their student loans. Generally this is about six months from the date of graduation or when you drop below half-time. Check with your lender.

Lender Fees: May also be referred to as processing fees or underwriting fees. These are fees the lender charges to offset the cost of producing the loan.

Master Promissory Note (MPN): This is the legally binding document the student signs that makes them liable for repayment of the loan and states the terms of the loan, etc.

Origination Fee: The amount your lender charges for services performed handling the initial application and processing of the loan repayment.

Discounts: Some lenders will lower your principal balance if you make on-time payments. They may also give you a rate decrease for using automatic payments.

Repayment Fees: If you choose another plan besides the standard repayment plan, you may lower your monthly payments, but increase the total amount you pay over time.

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