FFEL STUDENTS LOAN

What kinds of student loans are available?

For student borrowers, FFEL Program Loans are either subsidized or unsubsidized. The FFEL Program offers subsidized and unsubsidized Stafford Loans .

A subsidized loan is awarded on the basis of financial need. If you qualify for a subsidized loan, the federal government pays interest on the loan ("subsidizes" the loan) until you begin repayment and during authorized periods of deferment thereafter.

An unsubsidized loan is not awarded on the basis of need. If you qualify for an unsubsidized loan, you'll be charged interest from the time the loan is disbursed until it is paid in full. You can choose to pay the interest or allow it to accumulate. If you allow the interest to accumulate, it will be capitalized---that is, the interest will be added to the principal amount of your loan and will increase the amount you have to repay. If you pay the interest as it accumulates, you'll repay less in the long run.

You can receive a subsidized and an unsubsidized loan for the same enrollment period as long as they are from the same program---either both from the Direct Loan Program or both from the FFEL Program.

Who can get these loans?

If you're a regular (degree-seeking) student enrolled in an eligible program of study at least half time, you may receive a FFEL Program Loan. You must also meet other general eligibility requirements .

Can I get both a Direct Loan and an FFEL Program Loan in the same enrollment period?

No. However, you could receive FFEL Program Loans one year and Direct Loans the next year.

How much can I borrow?

If you're a dependent undergraduate student you can borrow up to---
$2,625 if you're a first-year student enrolled in a program of study that is at least a full academic year;

$3,500 if you've completed your first year of study, and the remainder of your program is at least a full academic year;

$5,500 a year if you've completed two years of study, and the remainder of your program is at least a full academic year.

For periods of undergraduate study that are less than an academic year, the amounts you can borrow will be less than those just listed. Ask your financial aid administrator (FAA) how much you can borrow.

If you're an independent undergraduate student or a dependent student whose parents are unable to get a Loan, you can borrow up to---

$6,625 if you're a first-year student enrolled in a program of study that is at least a full academic year. (At least $4,000 of this amount must be in unsubsidized loans.)

$7,500 if you've completed your first year of study, and the remainder of your program is at least a full academic year. (At least $4,000 of this amount must be in unsubsidized loans.)

$10,500 a year if you've completed two years of study, and the remainder of your program is at least a full academic year. (At least $5,000 of this amount must be in unsubsidized loans.)

For periods of undergraduate study that are less than an academic year, the amounts you can borrow will be less than those just listed. Talk to your FAA to find out how much you can borrow.
NOTE: FFEL Program Loans are not made to undergraduates enrolled in programs that are less than one-third of an academic year.

If you're a graduate student, you can borrow up to $18,500 each academic year. (At least $10,000 of this amount must be in unsubsidized loans.)

NOTE: The amounts given above are the maximum yearly amounts you can borrow in both subsidized and unsubsidized Direct Loans or FFEL Program Loans, singly or in combination. However, you can't borrow more than your cost of attendance minus any other financial aid for which you're eligible. This means that you may receive less than the annual maximum amounts.

The total debt you can have outstanding from all loans is---

$23,000 as a dependent undergraduate student;

$46,000 as an independent undergraduate student (no more than $23,000 of this amount may be in subsidized loans);

$138,500 as a graduate or professional student (no more than $65,500 of this amount may be in subsidized loans). The graduate debt limit includes any Direct Loans and/or FFEL Program Loans received for undergraduate study.

What's the interest rate charged on these loans?

For students whose FFEL Program Loans was first disbursed on or after July 1, 1994, the interest rate is variable, but it will never exceed 8.25 percent. From July 1, 1994 through June 30, 1995, the interest rate is 7.43 percent.

The interest rate is adjusted each year on July 1. You'll be notified of interest rate changes throughout the life of your loan.

If you had FFEL Program Loans that were first disbursed before July 1, 1994, the interest rate on these loans may be different. Check with the lender or agency that holds your loan.

If you have subsidized loans, the federal government pays the interest while you're enrolled in school at least half time, during a grace period, or during authorized periods of deferment. Interest will begin to accrue when you enter repayment.

If you have unsubsidized loans, you'll be charged interest from the day the loan is disbursed until it is repaid in full, including in-school, grace, and deferments periods. You may pay the interest during these periods, or it can be capitalized.

Is there a charge for these loans?

You'll pay a fee of up to 4 percent, deducted proportionately from each disbursement of your loan. A portion of this fee goes to the federal government to help reduce the cost of the loans. Also, if you don't make your loan payments when they're scheduled, you may be charged late fees and collection costs.

When do I pay back these loans?

After you graduate, leave school, or drop below half-time enrollment, you have six months before you begin repayment. This is called a grace period.

During the grace period on a subsidized loan, you don't have to pay any principal, and no interest will be charged. During the grace period on an unsubsidized loan, you don't have to pay any principal, but interest will be charged. You can either pay the interest or allow it to accumulate.

After you leave school or drop below half-time enrollment, you'll receive information about repayment and will be notified of the date repayment begins. However, you're responsible for beginning repayment on time, even if you don't receive this information.

Is it ever possible to postpone repayment of my loan?

Yes. Under certain circumstances, you can receive a deferment or forbearance on your loan. During a deferment, no payments are required. If you have a subsidized loan, the federal government will pay the interest that accrues during the deferment. If your loan is unsubsidized, you will be responsible for the interest on the loan during the deferment. If you don't pay the interest as it accrues, it will be capitalized. During forbearance, your payments are postponed or reduced. The government does not pay the interest; you are responsible for it, and if you don't pay the interest as it accrues, it will be capitalized. You can't receive a deferment or forbearance if your loan is in default.

See the Loan Deferment Summary for the list of deferments available if your loan was first disbursed on or after July 1, 1993. If your loans were disbursed prior to that date, the lender or agency holding your loans can tell you about the deferments that apply to those loans.

Deferments are not automatic. If you have a Direct Loan, you must contact the Direct Loan Servicing Center to request a deferment form. If you have an FFEL Program Loan, you must contact the lender or agency that holds your loan to request a deferment form. For either program, you'll have to provide documentation to support your request. You must continue making scheduled payments until you receive notification that the deferment has been granted.

Forbearance isn't automatic either. You may be granted forbearance if you're willing but unable to meet your repayment schedule and you're not eligible for a deferment. If you have a Direct Loan, contact the Direct Loan Servicing Center to request forbearance. If you have an FFEL Program Loan, contact the lender or the agency that holds your loan. For either program, you'll have to provide documentation to support your request for forbearance. You must make scheduled payments until you are notified that forbearance has been granted.

Can my Direct or FFEL Program loan be discharged (canceled)?

Yes, in certain circumstances. A discharge releases you from all obligation to repay the loan. See the Discharge Cancellation Summary for a complete listing of discharge conditions.

Your loan can't be discharged because you didn't complete the program of study at the school, didn't like the school or the program of study, or didn't obtain employment after completing the program of study.

Repayment assistance (not a discharge, but another way to satisfy your obligation to repay) may be available if you serve in the military. For more information, contact your recruiting officer.

For more information about discharge or repayment assistance, Direct Loan borrowers can contact the Direct Loan Servicing Center; FFEL borrowers should contact the lender or agency that holds their loan.

FFEL Stafford Loans

The FFEL Program offers subsidized and unsubsidized Stafford Loans. The processes of applying for a loan and paying funds to the borrower, as well as the methods of repayment, differ somewhat between the Direct Loan Program and the FFEL Program.

How do I apply for an FFEL Stafford Loan?

The first step in the process is to complete the 1995-96 Free Application for Federal Student Aid (FAFSA) or Renewal FAFSA. After your FAFSA is processed, your school will review the results and will inform you about your loan eligibility.

You must also complete the Federal Stafford Loan Application and Promissory Note, available from your school, a lender, or your state guaranty agency. After you fill out your part of the application, the school you plan to attend must complete its part, certifying your enrollment, your cost of attendance, your academic standing, any other financial aid for which you're eligible, and your financial need. (Your need is evaluated to see if you qualify for a less costly subsidized FFEL Stafford Loan.)

NOTE: Your school can refuse to certify your loan application, or can certify a loan for an amount less than you would otherwise be eligible for, if the school documents the reason for its action and explains the reason to you in writing. The school's decision is final and cannot be appealed to the U.S. Department of Education.

When should I apply?

You should complete the 1995-96 FAFSA as soon as possible on or after January 1, 1995. You should begin looking for a commercial lender as soon as you're accepted by your school. Even if you're eligible for the loan funds, you may not receive them if you apply too late in the enrollment period.

How can I find a lender?

Contact your state guaranty agency. It's the best source of information on the FFEL Stafford Loan Program in your state. For your agency's address and telephone number, and for more information about borrowing, call the Federal Student Aid Information Center's toll-free number: 1-800-4-FED-AID (1-800-433-3243) . If your state does not have its own guaranty agency, ask your school or the Federal Student Aid Information Center for the name and telephone number of the guaranty agency that serves your state.

How will I be paid?

The lender will send the loan proceeds to your school in at least two payments, either by electronic funds transfer or by check (made payable either to you or to both you and your school). Your school can pay you directly (usually by check), credit your account, or combine these methods. Some schools may pay you as often as weekly or monthly, if your lender agrees. Even if you're paid less often, no payment may exceed one half of your loan amount. (If you're studying abroad, you can choose to receive your funds directly.)

If you're a first-year undergraduate student at your school and a first-time borrower, your first payment may not be disbursed until 30 days after the first day of your enrollment period. This way, you won't have to repay the loan if you don't begin classes, or if you officially withdraw during the first 30 days of classes.

How much will I have to pay each month?

The amount of each payment depends on your loan amount and on the length of your repayment period. If your first FFEL Program Loan was disbursed on or after July 1, 1993, you have the option of repaying your loan using a fixed, graduated or income-sensitive repayment plan, but you are required to repay the loan within 10 years.

The chart below shows estimated monthly payments and total interest charges for various 8.25 percent loans under a fixed repayment plan. Remember that 8.25 percent is the highest interest rate that can be charged for new loans. Your rate may be lower.

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