direct loan basics - eiu · direct loan consolidation center 1-800-557-7392 (tty 1-800-557-7395)...

Direct PLUS Loans for ParentsA simple, convenient, flexible way

to finance your child’s education.

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The William D. Ford Federal Direct Loan Program is one of theFederal Student Aid programs of the U.S. Department of Education.

Direct Loan Basicsfor Parents

Contacts

General information about student aid andapplying for student aid:

Federal Student Aid Information Center1-800-4-FED-AID(TTY 1-800-730-8913)Student Aid on the Webwww.FederalStudentAid.ed.gov

Visit the Web site or call for general information aboutstudent aid. From the Web site, you can access a variety ofstudent aid publications in English and Spanish, includingFunding Education Beyond High School: The Guide to FederalStudent Aid, a comprehensive overview of the federalfinancial aid process.

For information about the Department’s DirectLoan Program:

Direct Loans on the Webwww.direct.ed.gov

Your single contact for everything relatedto repayment of your Direct Loan:

Borrower Services at theDirect Loan Servicing Center1-800-848-0979(TTY 1-800-848-0983)Direct Loan Servicing Onlinewww.dl.ed.gov

Visit the Web site or call to get your loan account information,obtain a deferment or forbearance application, learn aboutmaking online payments, set up automatic payments, andmuch more.

For everything you need to know about DirectConsolidation Loans, and for an online application:

Direct Loan Consolidation Center1-800-557-7392(TTY 1-800-557-7395)Direct Loan Consolidation Web Sitewww.loanconsolidation.ed.gov

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How can Direct Loans help pay forcollege or career school expenses?Direct Loans are low-interest loans for students andparents to help pay for the cost of a student’s educationafter high school. The lender is the U.S. Departmentof Education (the Department) rather than a bankor other financial institution.

Direct Loans are:■ Simple—You borrow directly from the federal

government and have a single contact—the DirectLoan Servicing Center—for everything related tothe repayment of your loans, even if you receiveDirect Loans at different schools.

■ Convenient—You’ll have online access to yourDirect Loan account information 24 hours a day,7 days a week at Direct Loans on the Web at:www.dl.ed.gov.

■ Flexible—You can choose from several repaymentplans that are designed to meet the needs of almostany borrower, and you can switch repayment plansif your needs change.

What kinds of Direct Loansare available?■ Direct Subsidized and Unsubsidized Loans—

Direct Subsidized Loans are for students withdemonstrated financial need, as determinedby federal regulations. No interest is chargedwhile a student is in school at least half-time,during the grace period and during defermentperiods. Direct Unsubsidized Loans are not basedon financial need; interest is charged duringall periods.

■ Direct PLUS Loans—Direct PLUS Loans are for theparents of dependent students and for graduate/professional students. Interest is charged duringall periods.

■ Direct Consolidation Loans— Borrowers can combinedifferent eligible federal student loans into oneDirect Consolidation Loan.

What are the eligibilityrequirements for a parentto get a Direct PLUS Loan?■ You must be the biological or adoptive parent

(or, in some cases, the stepparent) of the studentfor whom you are borrowing.

■ Your child must be a dependent student whois enrolled at least half-time at a school thatparticipates in the Direct Loan Program. Generally,your child is considered dependent if he or she isunder 24 years of age, has no dependents, and isnot married, a veteran, a graduate or professionalstudent, or a ward of the court.

■ You cannot have an adverse credit history(a credit check will be done).

■ In addition, you and your child must be U.S.citizens or eligible noncitizens, must not be indefault on any federal education loans or owe anoverpayment on a federal education grant, andmust meet other general eligibility requirementsfor the Federal Student Aid programs.

Direct Loans on the Web: www.direct.ed.govCOVER PHOTO: ©Jupiter Images Corporation, 2008.

NOTE: All PLUS Loan applicants must meet

all general eligibility requirements for the

Federal Student Aid programs. You can find

more information about these requirements

in Funding Education Beyond High School:

The Guide to Federal Student Aid (see the

Contacts section of this brochure), or by

contacting the school’s financial aid office.

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When do I have to begin repayingmy loan?Repayment of a Direct PLUS Loan begins 60 days afterthe full amount you’ve borrowed for a school year hasbeen disbursed. This means that you generally mustbegin repayment while your child is still in school.However, for Direct PLUS Loans with a first disbursementdate that is on or after July 1, 2008, you may requestthat repayment be delayed until 6 months afteryour child graduates or is no longer enrolled at leasthalf-time. You can find more information aboutpostponing repayment by contacting the Direct LoanServicing Center or by visiting Direct Loans on theWeb (see the Contacts section in this brochure).

How much time will I have to repaymy loan, and how much will I haveto pay each month?Generally, you’ll have from 10 to 25 years to repay yourloan, depending on the repayment plan that you choose.Your monthly payment amount will be based on howmuch you borrowed and how long you take to repay.

You may choose one of several repayment plans:■ Standard Repayment Plan—Fixed monthly payments

for up to 10 years.

■ Graduated Repayment Plan—Payments that startoff lower at first, and then gradually increase, usuallyevery two years. The loan must be repaid in 10 years.

■ Extended Fixed or Extended Graduated RepaymentPlan—Fixed or graduated monthly payments overa period of time, not to exceed 25 years. Extendedrepayment plans are available only to new DirectLoan borrowers on or after Oct. 7, 1998, whocurrently have an outstanding Direct Loan balanceof more than $30,000.

You can change plans at any time. There’s no penalty ifyou make payments before they are due or pay morethan the amount due each month.

You can find more information about these plans byvisiting Direct Loans on the Web (see the Contacts sectionin this brochure).

Can I ever postpone makingloan payments?Yes, under some conditions you may receivea deferment or forbearance that allows youto temporarily stop or lower your payments.

For example, you may qualify for a deferment if:■ You (not your child) return to school

at least half-time.

■ You are unemployed or meet our rules foreconomic hardship (limited to 3 years).

■ You are serving on active duty or qualifyingNational Guard duty during a war orother military operation or national emergency.

■ You are a member of the National Guard orother reserve component of the U.S. ArmedForces (current or retired) and were called toactive duty service while you were enrolled atan eligible school, or within 6 months after havingbeen enrolled (additional conditions apply).

The Direct Loan Servicing Center can provideinformation on other conditions that will qualifyyou for a deferment.

If you don’t qualify for a deferment but aretemporarily unable to make loan payments forsuch reasons as illness or financial hardship, wemay grant you a forbearance.

We charge interest on Direct PLUS Loans duringall periods of deferment and forbearance.

Can my loan ever be canceled,discharged, or forgiven?You must repay your loan even if your child doesn’tcomplete or can’t find a job related to his or herprogram of study, or if you or your child are unhappywith the education you paid for with your loan.

However, we will cancel your loan if you have yourloan discharged in bankruptcy, if you die or if thechild for whom you borrowed dies, or if you becometotally and permanently disabled.

SAVE TIME & MONEY WITHAUTOMATIC MONTHLY PAYMENTSWe offer the option of having your loan paymentsautomatically taken out of your bank account throughour Electronic Debit Account (EDA) program. Thissaves you the trouble of writing a check each month,and ensures that your payment always will be made ontime. Plus, we’ll reduce your interest rate by a quarterpoint (.25%) during all periods when your paymentsare being made under this option.

Direct Loans on the Web: www.direct.ed.gov

How do I apply for a DirectPLUS Loan?To apply for a Direct PLUS Loan you need to completethe Direct PLUS Loan application, which includes aMaster Promissory Note (MPN). The MPN explainsthe terms and conditions of your loan and is yourlegally binding agreement to repay your loan to theDepartment. In most cases, one MPN can be used forloans that you receive over multiple academic years.

The school will provide a copy of the application andMPN or tell you if you can apply online. Your child mayneed to complete the Free Application for FederalStudent Aid (FAFSA). Check with the financial aidoffice at your child’s school.

How much can I borrow?There are no set limits for Direct PLUS Loans, but youmay not borrow more than the cost of your child’seducation minus any other financial aid received, suchas a Direct Subsidized or Unsubsidized Loan. The schoolwill determine the actual amount you may borrow.

What is the interest rate?The interest rate for Direct PLUS Loans is a fixed rateof 7.9%. Interest is charged on Direct PLUS Loansduring all periods, beginning on the date of your loan’sfirst disbursement. To find out more information oninterest rates for Direct PLUS Loans, contact the DirectLoan Servicing Center (see the Contacts section ofthis brochure).

Is there a charge for this loan?Yes. In addition to interest, you pay a loan originationfee that is a percentage of the principal amount ofeach Direct PLUS Loan that you receive. This fee helpsreduce the cost of making these low-interest loans. Wededuct the fee before you receive any loan money, sothe loan amount you actually receive will be less thanthe amount you have to repay.

How will I receive my loan money?Your child’s school will generally disburse loan moneyby crediting it to your child’s school account, but alsomay give some of it directly to you. In some cases, withyour permission, the school may disburse some of thePLUS loan money directly to your child. Loan moneywill usually be disbursed in at least 2 installments.

We may discharge some or all of your loan if:■ The school closed before your child completed

the program.

■ The school forged your signature on yourpromissory note or falsely certified that yourchild was eligible for aid.

■ Your loan was falsely certified throughidentity theft.

■ Your child withdrew from school but the schooldidn’t pay a refund that it owed under its writtenpolicy or the Department’s regulations. Checkwith the school to see how refund policies applyto federal aid at the school.

You also may qualify for forgiveness of the remainingbalance due on your Direct Loans after you have made120 payments on those loans while employed in certainpubic service jobs (additional conditions apply). The DirectLoan Servicing Center can provide more informationabout the public service loan forgiveness program.

Can I transfer a Direct PLUS Loanto my child so that it becomes mychild’s responsibility to repay?No. A Direct PLUS Loan made to a parent cannotbe transferred to a student. You are responsiblefor repaying a Direct PLUS Loan.

Where can I get more information?For more information about the Direct Loan Program andother Federal Student Aid programs, contact the financialaid office at your child’s school or check the Contactssection of this brochure.

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