Loans are borrowed funds which must be repaid, with interest, after you are no longer a student or you are attending less than half-time. If you do not make your regular payments, you could end up in default, which has serious consequences. The FY2019 3-Year Official Cohort Default Rate (CDR) for Louisiana Tech University is 1.8% which is below the National average of 2.3%. Our office recommends to only borrow as much as you “need” and student loans should be an absolute last resort. A student always has the ability to refuse all or borrow less that the maximum loan amount allowed or awarded.
As college costs climb, many families find that supplemental borrowing by the parent or student becomes a necessary resource for financing educational expenses. The following are different types of loans a student or parent can acquire. We encourage borrowers to take the time to read the following information to help you understand the William D. Ford Federal Loan Program. If you still have questions, please visit our office and speak with one of our financial aid counselors.
Direct Stafford Loans
These loans have low interest rates and do not require credit checks or collateral. effective July 1st, 2022 Direct Undergraduate Stafford Loans have current fixed interest rates of 4.99% and Direct Graduate Stafford Loans are 6.54%. The federal loan for students is called the Stafford Loan and is under the Direct Loan Program. These loans are provided by the U.S. Department of Education using federal funds. These loans are made by the federal government.
There are annual and lifetime limits for the amounts a student can receive in Direct Stafford loans set by the Department of Education. For more information on Direct Stafford Loan limits: https://studentaid.ed.gov/sa/sites/default/files/federal-loan-programs.pdf
Direct Loans include the following types for federal student loans:
- Direct Subsidized Loans- while in school, you are not responsible for accrued interest. Available only for undergraduates.
- Direct Unsubsidized Loans- you are responsible for all the accrued interest from the day of disbursement.
- Direct PLUS Loans – credit-based loan available for graduate students or parents of dependent undergraduates.
You repay your Direct Loan(s) to the U.S. Department of Education via a Servicer they assign to you. Before you take out a loan, it’s important to understand that a loan is a legal obligation that you will be responsible for repaying with interest.
Direct PLUS Loans
Federal Direct PLUS Loans enable parents with good credit histories to borrow funds to pay the education expenses of each child who is a dependent undergraduate student. Students pursuing a graduate or professional degree with good credit histories can also borrow from the Direct PLUS Loan program. Effective July 1st, 2022, Direct PLUS Loans have current fixed interest rates of 7.54%.
Federal Student Loan Borrowers Rights and Responsibilities
In order to participate in the federal student loan programs an entrance counseling session and Master Promissory Note (MPN) must be completed before you can receive funds at studentaid.gov. You will also be required to complete the exit counseling session at the same web site when you graduate or drop below half-time enrollment levels. Students that fail to complete it within 30 days of the initial notice will be emailed a link to the Exit Counseling Guide. Additional details are below for students who cease halftime enrollment levels and its consequences.
Master Promissory Note
The Master Promissory Note is a binding legal document that you must sign before you may receive a federal student loan. There is one MPN for Direct Subsidized/Unsubsidized Loans and a different MPN for Direct PLUS Loans. These may be signed electronically at studentaid.gov.
The MPN can be used to make one or more loans for one or more academic years (for up to 10 years). It lists the terms and conditions under which you agree to repay the loan in full and will explain your rights and responsibilities as a borrower. It’s important to read and save your MPN because you’ll need to refer to it later when you begin repaying your loan or at other times when you need information about provisions of the loan, such as the requirements for a deferment or forbearance. If you do not want to receive more than one federal student loan under the same MPN, you must notify your loan servicer in writing each academic year.
For each federal student loan that you receive under an MPN, you’ll receive a disclosure statement that provides specific information about that loan, including the loan amount, loan fees, and the expected disbursement dates and amounts from the federal government. Other disclosures will be provided to you throughout the loan process.
You must be enrolled in school at least half-time to receive Direct Loans and to keep your loan(s) out of repayment. Half-time at Louisiana Tech is 4 hours for undergraduate students and 3 hours for graduate students. If your enrollment in school drops below half-time you may have to begin making payments unless you qualify for postponement of payments. Typically this 6-month period is called a grace period or a deferment period, depending on the type of loan you received.
Direct Loans are “simple daily interest” loans (this means that interest accrues daily). The amount of interest that accrues per day is calculated by dividing the interest rate on your loan (as a decimal) by the number of days in a year, and then multiplying that by the outstanding principal balance. For example, on a $7,500 Direct Unsubsidized Loan with a 6.8% interest rate, the amount of interest that accrues per day is $1.39: (0.068 / 365) * $7,500 = $1.39.
Option to pay interest while in school
You have the right to pay interest on your Direct Unsubsidized and Direct PLUS Loans while you are in school to save money and help you pay off your loan faster. Making payments while you are not required to do so (while you are in school, during your grace period, or during a period of deferment or forbearance) instead of allowing interest to be capitalized (added to the principal balance) can substantially reduce the cost of your federal student loan over time.
The Department of Education has setup several repayment options for borrowers that are designed to meet their needs. Visit the National Student Loan Data System to review your federal loan details and to obtain your Servicer(s)’ contact information. Your servicer can help you answer questions in connection with your loans. For more information on repayment plans and repayment estimator, please visit https://studentaid.gov/loan-simulator/.
Private (Alternative) Educational Loans
Private or alternative loans are available to students who are not eligible for financial aid or who need additional funds to meet educational expenses. The student’s eligibility is determined by the cost of attendance minus other financial aid. For more information please visit our private loan guide.