Direct (Stafford) Loan
Federal Direct Loan
Martin Luther College participates in the William D. Ford Federal Direct Loan Program. Under the Direct Loan Program, students apply for and receive their loan funds directly from the U.S. Department of Education rather than through a private lender.
What is a Direct Loan?
www.studentaid.gov is a federal web site that provides students and parents comprehensive information regarding subsidized and unsubsidized Direct and Parent PLUS.
Subsidized Direct Loans are need based loans. Eligibility is determined by results of the FAFSA. The federal government pays the 4.66% interest while you are in school. Scholarships and grants received can result in a change in the loan eligibility amount shown on your award letter from subsidized to unsubsidized.
Unsubsidized Direct Loans are non need based loans. The FAFSA must be completed on loans borrowed in 2014-15. Interest accrues at the rate of 4.66% from the date of disbursement and throughout the life of the entire loan. Borrowers have the option to defer the interest until repayment or make interest payments quarterly during their in-school status.
Graduate Students are eligible for unsubsidized loans only. The interest rate for graduate student loans is 6.21%
- Loan origination fees and/or default fees required to be paid to the Department of Education may be deducted from each disbursement. The current origination fee is 1.04%. For example, on a $5500 loan, $56 is subtracted resulting in a net disbursement of $5444.
- Half of your loan is disbursed each semester. Funds are paid to your account as they are received.
- The standard maximum repayment term is 10 years with a $50 minimum monthly payment. The monthly payment of a $10,000 loan is approximately $115 per month.
The Direct subsidized and unsubsidized loan programs limit the amount a student may borrow each year based on the student’s grade classification and dependent/independent status. In combination of subsidized and unsubsidized loans, the annual loan limits for undergraduate dependent students are:
- 1st year $5,500 with subsidized not to exceed $3500
- 2nd year $6,500 with subsidized not to exceed $4500
- 3rd to 5th years $7,500 with subsidized not to exceed $5500
Annual loan limits for undergraduate independent students:
- 1st year $9,500 with subsidized not to exceed $3,500
- 2nd year $10,500 with subsidized not to exceed $4,500
- 3rd to 5th years $12,500 with subsidized not to exceed $5,500
Requesting a Direct Loan
Once you've received your Award Package you will decide if you need to borrow funds to pay for college. Here is the process for requesting a Direct Loan
Depending on if this is your first time requesting a Direct Loan, you need to follow these steps:
FIRST TIME DIRECT LOAN BORROWERS COMPLETE STEPS 1-4
REPEAT DIRECT LOAN BORROWERS COMPLETE STEP 4 ONLY
- Get your Federal Student Aid PIN - Formerly referred to as your FAFSA PIN. Because your PIN serves as your electronic signature, you should not give it to anyone. If you don’t have your PIN, you can retrieve it by going to http://www.pin.ed.gov.
- Complete Direct Loan Entrance Counseling. First time borrowers must complete Direct Loan entrance counseling before receiving loan funds. https://studentloans.gov
- Complete and sign the Master Promissory Note (MPN) https://studentloans.gov
If you don’t have your own computer with web access, check with your public library. Ideally, there should be a printer available, so you can print a copy of the promissory note. You may also come to the Financial Aid Office and we will direct you to a computer. You will be able to complete your Direct Loan application much faster if you have the following information ready:
- Your driver's license number.
- Names and complete addresses of the two people you will use as personal references. One reference should be a parent or guardian (if living). References cannot have the same address.
4. Complete and submit the Direct Loan Request Form. All students who plan to borrow a Federal Direct loan for 2014-15 must submit the Loan Request Form. You may download and print it here: Direct Loan Request form.
If you are not sure you have previously signed an MPN with the U.S. Department of Education, go to https://studentloans.gov; log in and click on "Completed MPN's"