What are Direct Loans?
The William D. Ford Federal Direct Loan is the primary federal loan program for PLU students beginning with the 2010-11 academic year. Federal Direct Loans are funded by the federal government through the U.S. Department of Education and is a long term loan with a fixed interest rate. The interest rate on these loans for undergraduate students is 3.4% if subsidized (interest paid by the Federal Government) or 6.8% for graduate students and for undergraduates borrowing the unsubsidized loan.
Loan repayment begins six months after you complete the program, or drop below half time, which at Pacific Lutheran University, is six credits for undergraduates, four for graduate students. If you are borrowing the Federal Direct Loan for the first time, you are required to complete an entrance interview prior to receiving your loan proceeds. Loan proceeds are disbursed at the beginning of each semester and the loan is evenly divided over the loan period (number of semesters you will be enrolled at least half time) during the academic year. Loan proceeds are posted to your university student account and are applied against university charges for the semester. If your loan amount, when disbursed, exceeds your current university charges and creates a credit balance on your account, you may request the balance to be issued to you by completing a Refund Request Form at the Student Services Center. Refunds are generated weekly and are available on Fridays, by automatic deposit if your on-campus pay check is delivered by automatic deposit into your bank account, or by paper check at the Student Services Center.
After you have accepted your Federal Direct Loan on your financial aid award letter, the financial aid office will create your loan record with the U.S. Department of Education. After you have accepted your loan, first time borrowers should complete an electronic loan promissory note and a Direct Loan entrance counseling session at the Direct Loan web site.
Depending on the financial need of the student, Direct Loans can be subsidized (interest paid by the Federal Government) or unsubsidized.
This loan is awarded on the basis of financial need. The student will not be charged any interest before they begin repayment or during authorized periods of deferment. The federal government"subsidizes" the interest during these periods. Interest is 3.4% for undergraduate students and 6.8% for graduate students. Please note changes effective July 1, 2013: Interest on the subsidized loan returns to 6.8% for the 2013-14 academic year for undergraduate students, while subsidized loans for graduate students will no longer be available after the 2012-13 academic year.
This loan is not awarded on the basis of need. The student will be charged interest from the time the loan is disbursed until it's paid in full. If the student allows the interest to accumulate while in school or during other periods of nonpayment, it will be capitalized, that is, added to the principal amount of your loan, and additional interest will be based on that higher amount. Interest on the unsubsidized loan is 6.8%.
What are the Loan fees?
These Federal Direct Loans have a 1.0% origination fee assessed against the amount borrowed. One half of one percent (.5%) is deducted from the loan prior to its disbursement to the student. The remaining .5% fee is a rebate to the borrower, but will be added to the loan balance during loan repayment if the borrower fails to make the first 12 monthly payments on time. Please note changes for 2013-14: As a result of sequestration, loan origination fees will increase on Direct Loans from 1% to 1.051%.
Who is eligible?
In most circumstances if you are a U.S. Citizen or in the United States on a Permanent Visa status, have been admitted to the university and enrolling at least half-time, you will be eligible for Direct Loans.
How do you apply?
To apply for a Direct loan you must first submit a FAFSA form (remember to include PLU's school code 003785). Upon receiving your FAFSA information from the federal government, PLU will compile an award letter. If you are awarded a Direct loan, you will need to complete the loan promissory note as well as the Direct Loan Entrance Interview at the Direct Loan website.
How much can I borrow?
The amount that you can borrow depends on your class standing, dependency status, and whether you are an undergraduate or graduate student. The following annual limits are effective July 1, 2008.
Dependent Undergraduate Student
- $5,500 - First year student, with up to $3,500 subsidized by the federal government
- $9,500 – First year student whose parent has been denied the Federal Parent Loan, with up to $3,500 subsidized by the federal government
- $6,500 - Second year student, with up to $4,500 subsidized by the federal government
- $10,500 - Second year student whose parent has been denied the Federal Parent Loan, with up to $4,500 subsidized by the federal government
- $7,500 – Third and Fourth year students, with up to $5,500 subsidized by the federal government.
- $12,500 – Third and Fourth year students whose parent has been denied the Federal Parent Loan, with up to $5,500 subsidized by the federal government.
Independent Undergraduate Student
- $9,500 - First year student, with up to $3,500 subsidized by the federal government.
- $10,500 – Second year student, with up to $4,500 subsidized by the federal government
- $12,500 - Third and Fourth year students, and post-BA students in Teacher Certification program, with up to $5,500 subsidized by the federal government
- $20,500 - Each academic year. Up to $8,500 can be subsidized by the federal government for loans made for enrollment periods that start prior to July 1, 2012.