Direct & PLUS Loans

Direct Loans (DL) are low-interest loans for students and parents to help pay for the cost of a student’s education after high school. The lender is the U.S. Department of Education (the Department) rather than a bank or other financial institution.

 With Direct Loans, you:

 ► Borrow directly from the federal government and have a single servicer contact for everything related to the repayment of your loans, even if you receive Direct Loans at different schools.

► Have online access to your Direct Loan account information 24 hours a day, 7 days a week at the National Student Loan Data System (NSLDS).

► Can choose from several repayment plans that are designed to meet the needs of almost any borrower, and you can switch repayment plans if your needs change.

Applying for Direct Loans

As with all federal student aid, you apply for Direct Loans by filling out the Free Application for Federal Student Aid (FAFSA). Most students use FAFSA on the Web to complete their applications and utilize the IRS Data Retrieval Tool (DRT). The information on your FAFSA is transmitted to the schools that you list on the application, and those schools use the information to assess your financial need for student aid.

The Award Package

Direct Loans are generally awarded as part of a larger “award package,” which may contain other types of aid as well, to help you meet the costs of going to college.

The Direct Loan Program offers the following types of loans:

Subsidized: for students with demonstrated financial need, as determined by federal regulations. No interest is charged while a student is in school at least half-time. For loans disbursed on or after July 1, 2013, interest is charged during the 6 month grace period before repayment begins.

Unsubsidized: not based on financial need; interest is charged during all periods, even during the time a student is in school and during grace and deferment periods.

PLUS: Unsubsidized loans for the parents of dependent students. PLUS loans help pay for education expenses up to the cost of attendance minus all other financial assistance. Interest is charged during all periods.              NOTE: PLUS loan borrowers cannot have an adverse credit history (a credit check will be done).

 Consolidation: Eligible federal student loans can be combined into one Direct Consolidation Loan.

Student borrowers are not required to begin making payments until after they drop below half-time attendance.

CMC will tell you how much you may borrow and the types of loans you are eligible to receive.

Accepting a Loan

CMC will notify you of the loan amounts in an “e-award notification” that lists all of your proposed financial aid awards (your award package). You will be directed to WebAdvisor  to accept your awards.

You should evaluate the aid offer carefully. In the case of loans, keep in mind that whatever amount you borrow must be paid back with interest. If your living expenses are not as high as the standard allowance projected by your school, you may not have to borrow as much as the amount in the award letter. You have the right to decline the loan or to request a lower loan amount.

Interest Rates

The Direct Subsidized Loan interest rate for undergraduates with a first disbursement date between July 1, 2013, and June 30, 2014 is 3.86%. The origination fee for a Direct Subsidized loan is 1.072%.

The Direct Unsubsidized Loan interest rate for undergraduates with a first disbursement date between July 1, 2013, and June 30, 2014 is 3.86%.  The origination fee for a Direct Unsubsidized loan is 1.072%.

 ► The Direct PLUS Loan interest rate for loans first disbursed between July 1, 2013 and June 30, 2014 is 6.41%. The origination fee for a Direct PLUS loan is 4.288%.

Entrance Counseling

Except for Direct PLUS Loan borrowers, if you haven’t previously received a Direct Loan at Colorado Mountain College, you must complete CMC specific ENTRANCE COUNSELING before we can make the first disbursementof your loan. This helps you to understand your responsibilities regarding your loan. Complete this counseling online at StudentLoans.gov.

NOTE: It does not matter if you completed entrance counseling previously for another school. Entrance counseling MUST be completed again using the CMC school code, 00450600.

The Master Promissory Note

To take out a Direct Loan for the first time, you must complete a MASTER PROMISSORY NOTE (MPN). Complete the MPN on the StudentLoans.gov website. CMC offers the option of completing the MPN electronically. The MPN is a legal document in which you promise to repay your loan(s) and any accrued interest and fees to the Department. It also explains the terms and conditions of your loan(s).

To complete an MPN online, you will be required to use your Department of Education-issued PIN. If you do not have a PIN, you may request one from the official PIN site. A parent borrower must also request a PIN number from the PIN site to use when completing a PLUS MPN.

In most cases, once you’ve submitted the MPN and it’s been accepted, you won’t have to fill out a new MPN for future loans you receive. You can borrow additional Direct Loans on a single MPN for up to 10 years. You should, however, ensure that you maintain this document in a safe location.

You’ll receive a disclosure statement from the Department that gives you specific information about any loan that CMC plans to disburse under your MPN, including the loan amount, fees, and the expected disbursement dates and amounts.

How the Loans Are Disbursed (Paid Out)

Generally, your loan will cover a full academic year and CMC will make at least two disbursements to you, for example, at the beginning of each semester (CMC always disburses single term (ie: semester) loans in two disbursements, the first depends upon borrower history (two weeks or 30 days into the semester), and the second at the mid-point of the term).

In most cases CMC will disburse your loan money by crediting it to your school account to pay (tuition and fees, room and board, and other authorized charges). If the loan disbursement amount exceeds your school charges, CMC will pay you the remaining balance of the disbursement directly by check or other means.
Using the loan for education expenses: You may use the loan money you receive only to pay for your education expenses. Education expenses include school charges such as tuition, room and board, fees and indirect expenses such as books, supplies, equipment, dependent child care expenses, transportation and rental or purchase of a personal computer.

Paying Interest While In School

You may choose to pay interest on your Direct Unsubsidized or Direct PLUS loans while you are in school. If you choose not to pay the interest while you’re in school, it will be added to the unpaid principal amount of your loan.

This is called “capitalization,” and it can substantially increase the amount you repay, especially if you are receiving multiple loans for a multi-year program. Capitalization increases the unpaid principal balance of your loan, and DL will then charge interest on the increased principal amount.

It will save you some money in the long run if you pay the interest as it accrues on your loan while you’re in school or during the grace period. This is also true if you pay any interest that accrues during periods of deferment or forbearance after you leave school.

Direct Loans are low-interest loans for students and parents to help pay for the cost of a student’s education after high school. The lender is the U.S. Department of Education (the Department) rather than a bank or other financial institution.

Dependent Student1

Independent Student2

1st-year  $        5,500.00 Maximum  $        9,500.00 Maximum
Undergraduate  $        3,500.00 Subsidized  $        3,500.00 Subsidized
2nd-year  $        6,500.00 Maximum  $      10,500.00 Maximum
Undergraduate  $        4,500.00 Subsidized  $        4,500.00 Subsidized
3rd & 4th-year  $        7,500.00 Maximum  $      12,500.00 Maximum
Undergraduate  $        5,500.00 Subsidized  $        5,500.00 Subsidized
¹Except those whose parents are unable to borrow a PLUS loan.                      
²These limits also apply to dependent students whose parents are unable to borrow a PLUS loan.

 

Parent Eligibility Requirements for a Direct PLUS Loan

You must be the student’s biological or adoptive parent or the student’s step-parent, if the biological or adoptive parent has remarried at the time of application. Your child must be a dependent student who is enrolled at least half-time at CMC. For financial aid purposes, a student is considered “dependent” if he or she is under 24, unmarried, and has no legal dependents at the time the Free Application for Federal Student Aid is submitted. (Exceptions are made for veterans, wards of court, and other special circumstances.) If a student is considered dependent, then the income and the assets of the parent have to be reported on the FAFSA.


Additional Requirements to Receive a PLUS Loan

Parent PLUS loan borrowers cannot have an adverse credit history (a credit check will be performed). In addition, parents and their dependent child must be U.S. citizens or eligible noncitizens, must not be in default on any federal education loans or owe an overpayment on a federal education grant, and must meet other 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 available at the Federal Student Aid website.

Applying for a PLUS Loan and the Master Promissory Note (MPN)

To take out a Direct PLUS Loan for the first time, you must complete a Parent Borrower Form and Master Promissory Note (MPN). The MPN is a legal document in which you promise to repay your loan(s) and any accrued interest and fees to the Department. It also explains the terms and conditions of your loan(s). CMC offers the option of completing the MPN electronically; you can do so online at StudentLoans.gov. If you are borrowing Direct PLUS Loans for more than one student, you’ll need to complete a separate MPN for each one. To complete an MPN online, you will be required to use your Department of Education- issued PIN (not your child’s). If you do not have a PIN, you may request one from the official PIN site.

In most cases, once you’ve submitted the MPN and it’s been accepted, you won’t have to fill out a new MPN for future loans you receive to pay for the educational expenses of the same student.

You’ll receive a disclosure statement that gives you specific information about any loan that CMC plans to disburse under your MPN, including the loan amount and loan fees, and the expected loan disbursement dates and amounts.

 

Credit Check & Endorser Alternative

When you apply for a Direct PLUS Loan, the U.S. Department of Education will check your credit history. To be eligible for a PLUS Loan, you must not have an adverse credit history. If you are found to have an adverse credit history, you may still borrow a PLUS Loan if you get an endorser who does not have an adverse credit history. An endorser is someone who agrees to repay the Direct PLUS Loan if you do not repay the loan. The endorser may not be the student on whose behalf a parent obtains a Direct PLUS Loan. In some cases, you may also be able to obtain a Direct PLUS Loan if you document to the department’s satisfaction that there are extenuating circumstances related to your adverse credit history.

Loan Limits, Interest Rate, and Loan Charges

There are no set limits for Direct PLUS Loans, but you may not borrow more than the cost of your child’s education minus any other financial aid received, such as a Direct Subsidized or Unsubsidized Loan. CMC will determine the actual amount you may borrow.

The interest rate for Direct PLUS Loans is a fixed rate of 6.41%. Interest is charged on Direct PLUS Loans during all periods, beginning on the date of your loan’s first disbursement. To find out more information on interest rates for Direct PLUS Loans, visit the Federal Student Aid website.

In addition to interest, you pay a loan origination fee that is a percentage of the principal amount of each Direct PLUS Loan that you receive. This fee helps reduce the cost of making these low-interest loans. The fee is deducted before you receive any loan money, so the loan amount you actually receive will be less than the amount you have to repay. Dependent students whose parents have applied for but were unable to get a PLUS Loan are eligible to receive additional Direct Unsubsidized Loan funds.  The origination fee is 4.288%.

How A PLUS Loan is Disbursed (Paid Out)

Generally, your PLUS loan will cover a full academic year and CMC will make at least two disbursements to you, for example, at the beginning of each semester, unless you declare otherwise on your Parent Borrower Form.

Using the Loan for Educational Expenses:

You may use the loan money you receive only to pay for your child’s education expenses at CMC. Education expenses include school charges such as tuition, room and board, fees, and indirect expenses such as books, supplies, equipment, dependent child care expenses, transportation, and rental or purchase of a personal computer.