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Direct Loans FAQ
- What is a student loan?
- What kinds of loans are available?
- What is the difference between the two types of Direct Loans?
- What kinds of problems could cause my loan process to be held-up?
- What is the interest rate?
- Are there any other costs associated with these loans?
- Am I eligible for these loans?
- How do I complete a Promissory Note?
- How much can I borrow?
- How is your money disbursed?
- What if I have other student loans?
What is a student loan?
A student loan is money you borrow for educational purposes that you must pay back with interest. The specific sum of money you borrow is called the principal. Interest is a percentage of the principal which you pay as a fee for borrowing. When it comes time to pay back the principal and interest, you usually pay in monthly installments. If you fail to repay (or default), the government will penalize you. Seeking part-time employment and applying for scholarships is highly recommended, as Direct Student Loans are monies that must be repaid.
What kinds of loans are available?
All qualified financial aid students may borrow through the Direct Loan Program. The Direct Loan allows students to borrow directly from the U.S. Department of Education through the school. It includes subsidized and unsubsidized loans.
What is the difference between the two types of Direct Loans?
- "Subsidized" Direct Loan:
Based on financial need. Need is determined by subtracting the Expected Family Contribution (determined by federal formula) and all other forms of aid from the Cost of Attendance (COA). For Direct Student Loans with disbursements made on or after July 1, 2012, and before July 1 2014, interest will immediately begin to accrue as soon as the student is no longer enrolled in at least half-time status (6 or more units). The federal government will not pay the interest during the six-month grace period. Beginning July 1, 2012, the interest will be the responsibility of the student.
New federal regulations were implemented for first time borrowers effective July 1, 2013. This new regulation requires subsidized loan amounts to be prorated for all first time borrowers. (Students who do not currently owe ANY principal, interest or balance on any subsidized loans)The annual maximum loan amount an undergraduate student may receive must be prorated when the borrower is:
- enrolled in a program that is shorter than a full academic year; or
- enrolled in a program that is one academic year or more in length, but is in a remaining period of study that is shorter than a full academic year.
Enrollment status is defined as your number of units you are enrolled in during the course of the semester.
- Full time = 12 units or more
- 3/4 time = 9 to 11.50 units
- 1/2 Time = 6 to 8.5 units
New Federal Change for Loan Borrowers "150 Percent Change":
Effective for all loans originated after July 1, 2013, Federal Law now limits eligibility for subsidized loans to 150 percent of the length of the student's academic program. The 150 percent change means students in a two-year program will be eligible for subsidized student loans for the equivalent of three years. The student who reaches this limitation could continue to receive unsubsidized Stafford loans if he or she is otherwise eligible.
The new limitation affects new borrowers on or after July 1, 2013. Since only periods for which the student received subsidized loans appear to count, the 150 percent limit would only include periods of borrowing that began on or after July 1, 2013. For transfer students who were enrolled in more than one educational program that began on or after July 1, 2013, the limitation would be calculated by taking the difference between 150 percent of the published program length of the longest educational program in which the borrower was enrolled and any periods of enrollment in which the borrower received a subsidized Stafford loan.
Once a borrower has reached the 150 percent limitation, his or her eligibility for an interest subsidy also ends for all outstanding subsidized loans that were disbursed on or after July 1, 2013. At that point, interest on those previously borrowed loans would begin to accrue and would be payable in the same manner as interest on unsubsidized loans.
NOTE: New Federal regulations were implemented for first time borrowers effective July 1, 2013. This new regulation requires subsidized loan amounts to be prorated for all first time borrowers. (Students who did not have an outstanding balance of principal or interest on a Direct Loan or on a FFEL Program Loan as of July 1, 2013) Proration is calculated on the number of units a student is enrolled in for each semester a student requests a loan.
- "Unsubsidized" Direct Loan:
Not based on financial need and is available to you regardless of income. Because this loan is not subsidized by the government, you are responsible for all interest which accrues during in-school, grace and deferment periods. You may choose to make periodic interest payments to prevent having the accrued interest capitalized (added onto) the principal loan amount.
What kinds of problems could cause my loan process to be held-up?
- Default status:
Students who are in default on a student loan are not eligible for any Title IV financial aid programs. Students who owe a repayment to any Title IV financial aid program are not eligible for any Title IV financial aid programs until they provide proof that they have cleared their overpayment.
- Non-Degree Status:
Students must be enrolled at Solano Community College in a degree or certificate program to be eligible to apply for student loans.
- Enrolled less than half-time (6 units):
Students must be enrolled in and attending Solano Community College at least half-time (6 units) for the entire loan term.
- Lack of Satisfactory Academic Progress
Students must maintain Satisfactory Academic Progress. SAP must be a minimum of 67%, GPA must be 2.00 or better.
- Processed file
Student loans are not certified until your financial aid file has been processed. A completed file is necessary to determine your maximum loan eligibility.
What is the interest rate?
For Direct Subsidized and Unsubsidized loans where the first disbursement is on or after July 1, 2015 and before July 1, 2016, the fixed interest rate is 4.29%.
Are there any other costs associated with these loans?
For all Direct Subsidized Loans and Direct Unsubsidized Loans with a first disbursement date on or after October 1, 2014 and before October 1, 2015, the origination fee is 1.073%.
For all Direct Subsidized and Unsubsidized Loans with a first disbursement date on or after October 1, 2015 and before October 1, 2016, the origination fee is 1.068%.
Am I eligible for these loans?
To be eligible for a Direct Student Loan you must:
- Have a completed Financial Aid file including determination of Pell Grant eligibility.
- Must be a U.S. citizen or Eligible Non-Citizen as determined by the FAFSA application.
- Complete the Direct Stafford Loan Entrance Counseling, sign the Master Promissory Note, and submit the Solano Community College three page Loan request, along with current student Educational Plan and valid photo I.D.
- Be attending at least half-time (6 +units) for the entire loan period.
- Solano Community College will fund up to three full year loans, provided the student has completed at least 24 units between each loan, and SAP requirements have been met.
- Not be in default on any type of student grant.
- Not owe a repayment on a federal student grant.
- Be in compliance with Solano Community College's Satisfactory Academic Progress requirements.
How do I complete a Promissory Note?
Although you may have previously signed a Master Promissory Note (MPN) to receive the Federally Funded Education Loan , (FFEL) a prior MPN cannot be used to make Direct Loans. The MPN is a legal document through which you promise to repay your Direct Loans and any accrued interest and fees to the U.S. Department of Education. It also explains the terms and conditions of your loans. A Direct Loan MPN can be used to make loans for up to ten (10) years. You may complete a Direct Loan MPN electronically via the webpage link below. You must have a Federal Student Aid PIN. The Federal Student Aid PIN is the same PIN used to complete the Free Application for Federal Aid (FAFSA).
How much can I borrow?
How much you can borrow each year depends on your cost of attendance, other financial aid received, and grade level. However, the maximum subsidized amount for a grade level 1 student is $3,500. The grade level 2 subsidized maximum is $4,500. See the Financial Aid Office for details on grade level definition.
Direct Loan Maximums
Annual Limits (Effective July 1, 2008). Maximum amounts for each year of study:
Subsidized + Unsubsidized = Total
Subsidized + Unsubsidized = Total
|1st Year (0 – 23.9 units)||$3,500 + $2,000 = $5,500||$3,500 + $6,000 = $9,500|
|2nd Year (24 + units)||$4,500 + $2,000 = $6,500||$4,500 + $6,000 = $10,500|
- Dependent undergraduates: $23,000 - $31,000
- Independent undergraduates: $23,000 - $57,500
**Enrollment status is defined as your number of units you are enrolled in during the course of the semester.
- Full Time = 12 units or more
- 3/4 time = 9 to 11.50 units
- 1/2 time = 6 to 8.50 units
*Annual loan limits increased as of July 1, 2008. Please review your aggregate loan totals online at www.nslds.ed.gov. You will need your Federal Student Aid PIN number to access this site. If you borrow the annual maximum every year, you may reach the aggregate limit before you have completed your educational goal. The site may not yet include your most recent loan.
How is your money disbursed?
Loan funds are sent in multiple disbursements and are disbursed to your Higher One account. Your first disbursement will be 30 days after your initial semester begins, contingent upon the date the loan application was submitted and processed. If the loan is for one semester, federal regulations require two disbursements to be made within that semester.
What if I have other student loans?
You will continue to receive information from your lenders about your previous student loans. Solano Community College will provide enrollment information to your lenders to maintain your in-school status while you are in school. (You need to be enrolled in at least six units); However, if you encounter problems placing your loan on deferment status, contact Admissions and Records Office.