»Federal Direct Loans

Direct Loans are low-interest loans for students and parents to help pay for the cost of a student's education. The lender is the U.S. Department of Education, though the entity a borrower deals with, the loan servicer, can be a private business.

Each loan type has different terms and conditions:

  • Subsidized/Unsubsidized Direct Loan
  • Graduate PLUS Direct Loan
  • Parent PLUS Direct Loan

+-Federal Student Aid Changes for 2013-2014

Recent legislative changes have altered certain aspects of federal student loans.  As regulations change, the Office of Financial Aid updates all materials and makes every effort to disseminate that information to our students and their families.  Please see the most recent changes below.

Origination Fees

  • On August 2, 2011, Congress passed the Budget Control Act (BCA) of 2011, which put into place an automatic process of “across-the-board” Federal budget cuts, known as the sequester, to take effect if Congress failed to enact legislation by March 1, 2013 to reduce the Federal deficit.  The March 1st deadline passed and Congress failed to enact legislation.  Therefore, sequestration has been implemented.  As a result, Direct Loan origination fees first increased on new loans first disbursed between July 1, 2013 and November 30, 2013.  Origination fees increased again on new loans first disbursed on or after December 1, 2013.
  • The origination fees are as follows for loans first disbursed between July 1, 2013 and November 30, 2013:
    • 1.051% on all Subsidized and Unsubsidized Direct Loans
    • 4.204% on all Parent and Graduate PLUS loans
  • The origination fees are as follows for loans first disbursed on or after December 1, 2013:
    • 1.072% on all Subsidized and Unsubsidized Direct Loans
    • 4.288% on all Parent and Graduate PLUS loans

Subsidized Direct Loan Eligibility Limited to 150% of Academic Program

  • Effective for new Direct Loans for which the first disbursement is made on or after July 1, 2013, Subsidized Direct Loan eligibility is limited to a maximum of 150% of the student’s current academic program length.
    • Borrowers may receive Subsidized Direct Loans for no more than 150% of the length of the current academic program (ex: 6 years for a 4 year degree)
    • Once a borrower has received Subsidized Direct Loans for 150% of the length of their program, the borrower’s future Subsidized Loan eligibility will end.
    • A student who has received Subsidized Direct Loans for 150% of the length of their program and continues enrollment beyond that point will lose all subsidies on previously received Subsidized Direct Loans and would be required to pay all accumulated interest.
    • This policy is in addition to, and not in place of, the lifetime aggregate loan limits currently in place.

Interest Rate Changes on Federal Student Loans

  • The College Cost Reduction and Access Act (CCRAA), (Public Law 110-84), was signed into law on August 9, 2013.  This amended the Higher Education Act, section 455(b), to provide new formulas for determining interest rates on all Federal Direct Loans.  The law ties the fixed interest rates to the sum of the high yield of the 10-year Treasury note plus an additional percentage, with a set cap on the maximum rate that can be assessed for an award year.

Loan Type

Interest Rate Formula

Projected Interest Rate for 2013-2014

(fixed over life of loan)

Interest Cap

Subsidized/Unsubsidized Direct Loans for Undergraduate Students

T + 2.05%

3.86%

8.25%

Unsubsidized Direct Loans for Graduate Students

T + 3.6%

5.41%

9.5%

Graduate PLUS Direct Loans

T + 4.6%

6.41%

10.5%

Parent PLUS Direct Loans

T + 4.6%

6.41%

10.5%

 

*T = the 10-year Treasury note rate of 1.81%, as of June 1, 2013.

  • Each year, the interest rates will be determined by the 10-year Treasury note rate as of the preceding June 1st and the rates will be locked for that following year.  A loan disbursed within a particular year will carry that rate for the lifetime of the loan.

+-Subsidized/Unsubsidized Direct Loan

The Subsidized and Unsubsidized Direct Loans are offered to students to help pay for their education.  These loans are not dependent upon a credit check and require no previous borrowing.  These loans must be repaid by the students after they graduate, withdraw or drop below half-time status.

Subsidized Direct Loan

  • Need-based
  • No interest while in-school
  • Payments automatically deferred while in-school
  • Must be enrolled at least half-time
  • 3.86% interest rate*
  • 1.051% origination fee – loans first disbursed between 7/1/2013 and 11/30/2013
  • 1.072% origination fee – loans first disbursed on or after 12/1/2013*

Unsubsidized Direct Loan

  • Non-need-based
  • Interest accrues while in-school
  • Payments automatically deferred while in-school
  • Must be enrolled at least half-time
  • 3.86% interest rate for Undergraduate Students*
  • 5.41% interest rate for Graduate Students*
  • 1.051% origination fee – loans first disbursed between 7/1/2013 and 11/30/2013
  • 1.072% origination fee – loans first disbursed on or after 12/1/2013*

*Subject to change.

Annual Loan Limits

 

 Dependent

 Independent

 Freshman

 $5,500 ($3,500 in subsidized)

 $9,500 ($3,500 in subsidized)

 Sophomore

 $6,500 ($4,500 in subsidized)

 $10,500 ($4,500 in subsidized)

 Junior/Senior/Credential

 $7,500 ($5,500 in subsidized)

 $12,500 ($5,500 in subsidized)

 Graduate/Professional

 N/A

 $20,500 in unsubsidized

If a dependent student's parent is denied a Direct Parent PLUS Loan due to adverse credit, that student will be eligible for the Independent Student loan limits.

Aggregate Loan Limits

 

 Subsidized Maximum

 Combined Subsidized & Unsubsidized Maximum

 Dependent Undergraduate and Credential 

 $23,000

 $31,000

 Independent Undergraduate and Credential

 $23,000

 $57,500

 Graduate/Professional

 $65,500**

 $138,500**

**including the amounts borrowed as an undergraduate or credential student

How to Apply

  1. Log on to your WebAdvisor account and accept your Subsidized/Unsubsidized loan(s).
  2. Refer to the Federal Direct Subsidized/Unsubsidized & Graduate PLUS Loans Guide for more information.
  3. Log on to StudentLoans.gov with your FAFSA Pin and complete Federal Direct Loan Entrance Counseling for Undergraduates.
  4. While logged into StudentLoans.gov, complete the Master Promissory Note (MPN) by selecting Complete MPN from the menu on the left, and then selecting Subsidized/Unsubsidized.

+-Graduate PLUS Direct Loan

Graduate students with no adverse credit may borrow a loan to meet their own educational costs.  Graduate students may borrow up to the cost of attendance minus other financial aid. This loan must be repaid by the student after they graduate, withdraw or drop below half-time status.

  • Non-need-based
  • Interest accrues while student is in-school
  • Payments automatically deferred while student is in-school
  • Student must be enrolled at least half-time
  • 6.41% interest rate*
  • 4.204% origination fee – loans first disbursed between 7/1/2013 and 11/30/2013
  • 4.288% origination fee – loans first disbursed on or after 12/1/2013*

*Subject to change.

How to Apply

  1. Log on to your WebAdvisor account and accept your Graduate PLUS Loan.
  2. Refer to the Federal Direct Subsidized/Unsubsidized & Graduate PLUS Loans Guide for more information.
  3. Log on to StudentLoans.gov with your FAFSA Pin and complete Federal Direct Loan Entrance Counseling for Graduates.
  4. While logged into StudentLoans.gov, complete the Master Promissory Note (MPN) by selecting Complete MPN from the menu on the left, and then selecting Graduate PLUS.
  5. While logged into StudentLoans.gov, also complete the Graduate PLUS Loan Credit Check.  This is done by selecting Request PLUS Loan and then selecting Graduate PLUS.  Complete the application and verify all of the information submitted is correct.

+-Parent PLUS Direct Loan

Parents with no adverse credit may borrow a loan for their dependent child's educational costs.  Parents may borrow up to the cost of attendance minus other financial aid.  The loan must be repaid by the parent no later than after their student graduates, withdraws or drops below half-time status.

  • Non-need-based
  • Interest accrues while student is in-school
  • Payments can be deferred while student is in-school
  • Student must be enrolled at least half-time
  • 6.41% interest rate*
  • 4.204% origination fee – loans first disbursed between 7/1/2013 and 11/30/2013
  • 4.288% origination fee – loans first disbursed on or after 12/1/2013*

*Subject to change.

How to Apply

  1. The student should log onto his or her WebAdvisor account and accept the Parent PLUS Loan.
  2. Refer to the Federal Direct PLUS Loan Guide for more information.
  3. Have a parent log on to StudentLoans.gov with his or her FAFSA Pin and complete the Parent PLUS Loan MPN by selecting Complete MPN from the menu on the left and then selecting Parent PLUS.
  4. While the parent is logged into StudentLoans.gov, he or she must also complete the Parent PLUS Loan Credit Check.  This is done by selecting Request PLUS Loan and then selecting Parent PLUS.  Complete the application and verify all the information submitted is correct.

+-Federal Perkins Loan

Perkins Loans are awarded to Chapman students with exceptional need. They are interest free while students are in school at least half time, and the rate is 5% when not enrolled or less than half time. These loans are limited to $3,000 per year, but because these funds are extremely limited, awards are seldom this high. Repayment begins six months after the borrower leaves school or drops below half-time status. Borrowers are required to complete online entrance counseling prior to their first receipt of funds and an exit interview with the Office of Student Business Services when they leave Chapman. A promissory note must be completed online prior to the loan crediting student accounts. If you are awarded a Perkins loan, information will be sent to you by the Office of Student Business Services. You will need your Federal PIN to complete the online counseling and promissory note.

Learn more about the Federal Perkins Loan

+-Federal Loan Counseling and Master Promissory Note

Per Federal requirement, students who receive Federal Direct Loans for the first time must complete Federal Loan Entrance Counseling and the corresponding Master Promissory Note (MPN) for the loan(s).  Until these requirements are met, loan funds cannot be released to the student.

 

Federal Loan Entrance Counseling

Federal Loan Entrance Counseling is a process set up by the Federal government to educate new students about loans and the Federal Direct Loans program.  It consists of a short tutorial on the rights and responsibilities of the borrower followed by a short multiple choice quiz.  The process takes about 15 to 20 minutes to complete.  Federal Loan Entrance Counseling can be completed online at www.studentloans.gov by signing in with your FAFSA pin.  After logging in, you may select “Complete Entrance Counseling” from the menu on the left to start the process.

Upon successfully completing Federal Loan Entrance Counseling, an electronic statement of completion is generated within the Federal Direct Loans system.  This electronic statement is pulled down from the Federal Direct Loans system twice a week into Chapman University’s system.  Processing for this statement can take up to two days from the point at which the electronic statement reaches Chapman University’s system.

Master Promissory Note

It may be requested that you complete a MPN if one has not already been completed.  A MPN can be completed by logging into www.studentloans.gov and selecting “Complete MPN”.  Follow the steps accordingly.  Once completed, an electronic MPN will be generated.  You may wish to print a copy for your personal records.  These electronic MPNs are pulled down into Chapman University’s system twice a week and may take up to two additional days for processing after being imported into the system.

Note that a MPN must be completed by each borrower.  Federal Direct PLUS loans require a separate MPN.  For Parent PLUS borrowers, the PLUS Loan MPN must be completed by the borrowing parent.  For Graduate PLUS borrowers, a separate PLUS Loan MPN must be completed by the student in addition to the Federal Direct Subsidized/Unsubsidized MPN.

Please be aware that this is ONLY for Federal Direct Loans.  Other loans, such as the Chapman Interest-free and Perkins loans have their own requirements that must be met.

+-Federal Loan Exit Counseling

The federal government requires that borrowers who leave Chapman University for any reason complete Federal Loan Exit Counseling.  This requirement applies even if you intend to return to Chapman University following a leave of absence, for any extenuating circumstances. 

Federal Loan Exit Counseling can be completed online at studentloans.gov (Federal Student Aid - Direct Loans) by logging in with your FAFSA pin and selecting “Complete Counseling” then select "Exit Counseling".

In addition, you will need your federal PIN, the name, address, and telephone number of your next of kin, two references, and your employer after graduation (if you have one).  You will also need to report the total amount of educational loans you have received from each loan program and the current interest rate.

Information regarding all of your individual student loans can be seen, in detail, on nslds.ed.gov.

The Federal Loan Exit Counseling is similar to Federal Loan Entrance Counseling.  A step by step tutorial regarding the borrower’s rights and responsibilities will be given, followed by a short quiz.

Once completed, it will generate an electronic statement of completion.  These electronic statements are pulled down into Chapman University’s system twice a week.  After the electronic statement reaches our system, it may take up to two additional days to process.

Please be aware that by not completing Federal Loan Exit Counseling, your degree may be withheld until confirmation that Federal Loan Exit Counseling has been completed.

Please be aware that this is ONLY for Federal Direct Loans.  Other loans, such as the Chapman Interest-free and Perkins loans have their own requirements that must be met.

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