Financial Aid Loans

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Federal Loan Requirements

Borrowing Strategies

Federal Stafford Loan

The Federal Stafford Loan is a low-interest government loan to help you meet the cost of your education. If the loan appears as a subsidized Stafford Loan on your award offer, this means that the loan is one on which the government is paying the interest to the lender on your behalf. If the loan is labeled unsubsidized this means that the loan is not based on need and you should pay the interest on that loan while you are enrolled in school. You can defer the interest on an unsubsidized Stafford Loan, but be aware that when you go into repayment you will need to pay the past interest as well as the current principal and interest on the loan.

The Federal Stafford Loan (sub or unsub) has a 6-month grace period which means you do not have to start repayment of the loan until 6 months after you graduate, leave school or attend less than half time. The interest rate on these loans is fixed at 6.8% Unsubsidized or 6.0% Subsidized Stafford loans. The law caps the interest rate on these loans at 8.25%.

When you are offered a Stafford Loan you may adjust downward the amount you wish to borrow. You also will be asked to choose a lender from a list that we provide as part of the award offer. You should check the repayment benefits for the lenders to make sure you are aware of the various options. You may select a lender that is not on our list, however, you will need to obtain their lender code and insert it for us to process your loan with that lender.

Currently lenders and guarantee agencies (these are state agencies that approve the loans on behalf of the federal government) charge fees that are deducted from your loan disbursements. Some lenders offer a reduction in fees or opt not to charge a fee at all. The guarantor also may charge 1% default or guarantee fee. Consequently, your loan disbursement may be less than the gross amount by 1.5 to 2.5 percent. For example, you accept and are approved for a $3500 Stafford Loan. If no fees are charged, you receive $1750 in the fall semester and $1750 in spring semester. If your lender and the guarantor charge the fees, your $1750 disbursement is now $43.75 less or $1706.25, and the same will be true in spring. Check the Repayment Savings on the lender chart below for the current fee structure by lender.

There are both annual and aggregate loan limits for the Stafford Loan Program. Starting July 1, 2008 the limits for dependent students are $5,500 as a freshman of wchich no more than $3,500 may be subsidized; $6,500 as a sophomore of which no more than $4,500 may be subsidized; $7500 as a junior of which no more than $5,500 may be subsidized or senior and $8500 as an independent graduate student. Students who qualify to be independent can borrow additional unsubsidized loans up to $4000 for freshmen and sophomores and $5000 as juniors or seniors. Graduate students can borrow up to $12,000 in unsubsidized loan, not to exceed the cost of attendance. Dependent students whose parents are denied the PLUS loan by the lender may also borrow the unsubsidized Stafford Loan according their year in school: Freshman/Sophmore $4,000 or Junior/Senior $5,000. All funds may not exceed the student's budget. Seniors graduating at the end of fall semester may have loan funds prorated based on hours enrolled.

Students cannot borrow more than $31,000 aggregate in Stafford Loans as an undergraduate. Independent undergraduates may borrow up to $57,500, but only $23000 can be subsidized. Graduate students may borrow a total of $138,500 including all undergraduate loans, with no more then $65,500 in subsidized loans.

The Stafford Loan requires you to sign a Master Promissory Note before any funds will be disbursed. If you choose a lender from our list, your promissory note is in electronic format and you will be notified by the College Assist (the guarantor in Colorado) when your promissory note must be signed. That note is good up to 10 years so long as you continue to borrow from the same lender. Should you decide to change lenders, your signature will be required on a new note. Students may also prepay on these loans without penalty.

Be sure to review the Borrower Rights and Responsibilities on our web site under Documents for additional information.

Be sure to review the Borrower Rights and Responsibilities on our web site under Documents for additional information.

Loan Consolidation

You may consolidate your Stafford Loans to make it easier for you to repay your loans, either to combine loans under one lender or reduce your payment amount on a monthly basis. You are eligible to consolidate your loans during your grace period or during repayment, but you are advised to review all the benefits and loss of benefits that accompany loan consolidation.

Federal Perkins Loan

Unlike the Stafford or PLUS, you do not need to involve an outside agency to borrow a Perkins Loan. The lender for this federal loan is UNC and the funds that you are borrowing come from former UNC students repaying their Perkins Loans. Many students decline the Perkins Loan because the Perkins Loan amount is usually less than the Stafford Loan. Please compare the benefits of the loan programs before making a decision to decline or accept it.

Perkins Loans have a fixed interest rate of 5%. In addition, the grace period is nine months before you begin repayment on the loan. Perkins Loan can be consolidated with your Stafford Loans.

Students who plan to teach after graduation need to be aware of the particular cancellation provisions of the Perkins Loan. Each year the U.S. Department of Education publishes a list of schools that are considered to be disadvantaged. If the school in which you are teaching is listed, you may be eligible to have a portion of your Perkins Loan cancelled outright, thus reducing the amount you must repay.

The Perkins Loan also has annual and aggregate amounts that can be borrowed, but because the university decides the amount to be awarded under this program the annual and aggregate amounts are rarely reached. You also must sign a Master Promissory Note for the Perkins Loan. This is separate from the Stafford Promissory note. The Perkins MPN may be accessed by clicking on the link to the servicer ECSI.

PLUS (Federal Loan for parents of dependent undergraduate students)

Federal PLUS loans are offered to parents of dependent students. UNC requires that parents/students file the FAFSA to determine eligibility for this loan. These loans are equal to the cost of attendance minus other aid that the student accepts. PLUS loans are awarded to include the amount of the Expected Family Contribution. Parents are not obligated to accept a PLUS loan, or can adjust the amount they wish to borrow, but a student can only borrow an additional unsubsidized Stafford Loan if the parent applies for the PLUS and is denied by the lender.

All lenders do a credit check on the potential borrower of a PLUS Loan. If the parent has an adverse credit history, the loan can be denied. Parents who are denied can work with the lender to have the loan approved. A PLUS credit check does go against the parent credit report, but the debt to income ratio test is not applied for a PLUS loan.

There is no grace period on a PLUS loan. This means interest begins to accumulate at the time the first disbursement is made. Parents must start repayment of both principal and interest on a PLUS loan within 60 days after full disbursement of the loan has been made. This usually means repayment begins during the spring semester, as the loan has two disbursement requirements, one in fall, and one in spring. There is no provision to defer the PLUS loan payment until the student is out of school. Some lenders do offer interest-only payments for a limited time while the student is enrolled. That benefit is listed as a repayment option on the lender list.

The current interest rate is fixed at 8.5%. The law caps the interest rate on these loans at 9%. Like the Stafford Loan, the lender and guarantor may take fees out of the gross loan amount of up to 4% prior to disbursing the loan.

Many lenders and loan processors send out mailings saying "you are pre-approved for a PLUS Loan" and the like. Please remember that these lenders are looking at the same criteria for the PLUS loan as any of the lenders on our list. Lenders are on our list because they have a history of providing excellent service, the loans remain in Colorado for servicing and all funds are sent electronically. You do not need to have a previous banking relationship with a lender in order to borrow a federal loan from them. You will have the option of selecting your PLUS loan lender on the PLUS Authorization Form.

As part of the award letter process, the student must print out the PLUS Authorization Form for the parent to complete. UNC Office of Financial Aid must receive the 2008-09 PLUS Authorization Form to begin processing the PLUS Loan.

Once we have processed the PLUS loan your parent will be notified by the College Assist when the promissory note is ready to sign electronically so long as your parent selected a lender from our list. If your parent selected a lender not on our list, the borrower should either receive a paper promissory note from the lender or instructions on how to access an electronic note.

Please be aware that the PLUS Loan promissory note is also called a Master Promissory Note. If your parent has signed a PLUS Loan promissory note in the past and is using the same lender for the 2008-09 PLUS Loan, your parent should not have to sign a new promissory note. If your parent has never borrowed a PLUS loan before, the promissory note must be signed in order for us to request funds.

Be sure to review the Borrower Rights and Responsibilities on our web site under Documents for additional information.

PLUS Loans for Graduate Students

Normally offered only to parents of dependent undergraduate students, the graduate PLUS became available for the 2006-2007 academic year. UNC graduate students who are Colorado residents will still have their cost of attendance covered by the current $20,500 allowed under the Federal Stafford Loan Program. Non-resident graduate students whose costs are not met by the current Stafford Loan levels may want to consider the PLUS loan as a means to make up the difference.

Please note that PLUS loans do not have the same terms as the Stafford Loans. PLUS loan amounts are based on cost of attendance minus other aid received. The interest rate is 8.5% fixed versus the fixed rate of 6.0 subsidized or 6.8% unsubsidized for the Stafford Loan. There is also no in-school deferment unless that arrangement is made with the lender. Otherwise, you start repayment within 60 days of full disbursement of the loan.

You can contact the Office of Financial Aid to speak with a counselor if you need more information. Or you can check out our Lender Suggestions list:

Alternative Loans

These are loans available to students and parents of students who may not qualify for need-based financial aid programs to help defer a portion or all of the cost of education at UNC.

All students must be aware that these are private funds and different eligibility requirements come into play, such as creditworthiness and debt to income ratio, so some students will not qualify without a co-signer. Read carefully and get more information from the lender web sites listed.

In addition, all alternative loans will be counted in your financial aid eligibility whether or not the Office of Financial Aid certified the loan. For example, some alternative loans do not require that the university certify your eligibility for the loan. In that case, the Office of Financial Aid would not have knowledge of the loan you are borrowing. If you receive a check directly from the lender and use that check to apply to your university bill, then the Office of Financial Aid will be notified by Accounts Receivable. At that time we will post it as part of your financial aid award, which can affect the other aid you are receiving. Please bear that in mind when you are applying for loans in addition to other aid. If you have additional education-related expenses, you may want to visit with a financial aid counselor to determine your eligibility for a cost of attendance adjustment.

Federal Student Loan Forgiveness

    What loans qualify for this expanded loan forgiveness?

Qualifying federal loans for expanded teacher loan forgiveness now include Perkins Loans, federal Family Education Loans (FFEL), and Direct Loans that were borrowed on or after October 1, 1998. You are eligible if you did not have an outstanding balance on these loans on October 1, 1998.

    Who qualifies for this loan forgiveness?

A teacher must meet all of the following criteria:

• Borrowed Perkins, FFEL, and Direct Loans on or after October 1, 1998.
• Taught at a low-income school for five years.
• Highly qualified teacher. Math, science, and special education teachers are eligible for up to $17,500. Teachers who are highly qualified but do not teach math, science or special education are eligible for up to $5,000 in loan forgiveness.

    How are loans forgiven?

Loans are forgiven through loan providers. Contact your loan provider to (1) make sure that your loans qualify and (2) ask any questions you have about the application process.

    What is the definition of a low-income school?

A low-income school for teacher loan forgiveness purposes is a public or private non-profit elementary or secondary school that is located in a school district that qualifies for Title I funds and has more that 30 percent of the school's total enrollment made up of Title I Children.

Additional Resources for Loan Forgiveness Information