The Budget Control Act of 2011 was passed by the federal government on August 2, 2011. Certain provisions of this act affect Federal Direct Stafford and PLUS loans. The amount of funding available does not change, but these loans became more expensive. Here is a summary of the changes:
1. Graduate Students: All Stafford loans for graduate students will be unsubsidized loans for loans disbursed on or after July 1, 2012 and before July 1, 2013.
2. Update 7/3/2012: Congress has approved continuation of the 3.4% interest rate for subsidized Stafford loans. Previously the rate was set to increase to 6.8% for loans disbursed on or after July 1, 2012 and before July 1, 2013.
3. Loss of origination fee rebate: For the 2011-2012 year, there was a rebate of 0.5% on the 1% origination fee on Stafford loans, and a 1.5% rebate on the 4% origination fee for PLUS loans. Beginning July 1, 2012, the full fee--1% for Staffords and 4% for PLUS loans--will be charged.
4. Loss of subsidy for grace period: For subsidized Stafford loans disbursed on or after July 1, 2012 and before July 1, 2013, the subsidy will end when the student enters the grace period.
What are Direct Subsidized and Unsubsidized Loans?
A Direct Subsidized or Unsubsidized Loan is a student loan in the student’s name for educational purposes. The loan funds come from the government. It is categorized as either “subsidized” or “unsubsidized.” Loan repayment is deferred while the student is enrolled in school at least half-time and during the 6-month grace period after the student either graduates or drops below half-time. When the grace period is finished, the student starts repayment on the loan. However, if the student decides to go to graduate school, the loan will go back into deferment.
What is the difference between a “Subsidized” and an “Unsubsidized” Direct Loan?
The financial need of the student determines whether a loan is subsidized. The federal government “subsidizes” the interest of the loan, i.e. pays the interest, while the student is enrolled at least half-time. Change as of 2012-2013: Interest will now accrue for the subsidized Stafford loan once the student enters the grace period.
An unsubsidized loan is not awarded based on financial need. The student will be charged interest on the loan from the time it disburses until it is paid in full. The student has two options: To defer interest payments until graduation in which case the interest will be added to the principal amount of the loan or to pay the interest while in school and not have it accrue.
How much can the student borrow in Direct Subsidized and Unsubsidized Loans?
Dependent undergraduates have a Direct Loan maximum amount that they can borrow per academic year: For 2013-2014, the amounts are as follows:
In addition, many students may be eligible for an additional $2,000 in Direct Unsubsidized Loan.
Independent undergraduates can borrow the same amounts as above, plus an additional $4000 of Direct Unsubsidized Loan for freshmen and sophomores, and $5000 for juniors and seniors.
What is the interest rate?
Interest rates for Direct Subsidized Loans have a fixed interest rate of 3.4%, and Direct Unsubsidized Loans for undergraduates have a fixed interest rate of 6.8% for loans disbursed on or after July 1, 2013 and before July 1, 2014.
For both types, there is an origination fee of 1%. This amount is deducted from the loan at disbursement. Please take this into consideration when calculating your bill.
How does the student apply?
Where do I go for entrance counseling and to sign the MPN?
- Complete the FAFSA.
- Complete any documents requested by the Financial Aid Office.
- The student must accept loans online on myWheaton--This gives the Financial Aid Office permission to transmit information to the Department of Education.
- First-time borrowers must complete Loan Entrance Counseling.
- First-time borrowers must complete a master promissory note (MPN).
The Department of Education has a website called Studentloans.gov which it has established for students to manage their Direct Loans. (Beware--there is also a studentloans.com site which is NOT the government site).
You will need to use your FAFSA PIN to access the site and to sign the MPN. If you do not have a PIN, you may obtain one at PIN web site.
IMPORTANT:On the website, there is important information about browser requirements under "What You Need". If you do not have a compatible browser, various features will not work.