Introduction to US Loans
Key Players
The Borrower is the person who borrows the money under the Federal Family Education Loan Program (FFELP) guidelines. For certain loans, your parents may be the borrowers.
The Financial Aid and Awards Office (FAAO) at Concordia University works with you and your parents to determine your eligibility for different types of loans based on US federal guidelines. The FAAO also approves your federal loan application and the amount you can borrow. It reports enrolments and other information about FFELP borrowers to the US government, and is responsible for complying with US laws and regulations governing the FFELP.
The US Federal Government plays a key role in education financing through the FFELP. The US government guarantees the loan in case of default. (See also Guarantee Agency.)
A Guarantee Agency verifies your eligibility for a particular federal loan program and provides the insurance for those loans. If you do not repay your loan, the guarantee agency will pay the lender with funds received from the federal government and collect the balance directly from you.
A Lender actually provides the funds for the loan. The lender may be a bank or any other financial institution. The lender sends the money to the University. The lender may sell your loan to another party. When this happens you will be notified by the lender and by the new loan holder.
A Servicer is a company contracted by a lender to handle administrative aspects of the loan such as collection of payments, correspondence with borrowers, address changes, loan status updates and more. It is important to know the name of your servicer as very often all communication regarding your loan will be with the servicer.
Available Funds
Stafford Subsidized Loans are available for undergraduate, graduate and professional degree students. Eligibility is based on financial need as defined by the US Department of Education. "Subsidized" means that the US government pays the interest while you are studying at least half-time. The government also pays the interest during any authorized period of deferment and for the grace period.
Stafford Unsubsidized Loans are available for undergraduate, graduate and professional degree students. Eligibility is not based on financial need. You are responsible for paying the interest from the time the money is disbursed. The interest may be paid as it is due or it may be postponed and allowed to accumulate while you are in school as well as during any authorized period of deferment and during the grace period. If payments are postponed, the interest accrues and is capitalized (added to the amount you borrowed). Capitalized interest must then be paid back with the loan after any authorized period of deferment or after the grace period.
For all Stafford loans, subsidized and unsubsidized, disbursed on or after July 1st, 2006, the interest rate is fixed at 6.8%. For those disbursed on or after July 1st, 2008 and before July 1st, 2009 the interest rate is fixed at 6%.
Here are the maximum borrowing limits for subsidized and unsubsidized Stafford loans:
Annual Limits As of July 1st 2007 As of July 1st 2008 Subsidized Unsubsidized Total (Subsidized + Unsubsidized) Subsidized Unsubsidized Total (Subsidized + Unsubsidized) Dependant Undergraduates 01 (1st year) $3,500 * $3,500 $3,500 $2,000 $5,500 02 (2nd year) $4,500 * $4,500 $4,500 $2,000 $6,500 03 (3rd year and beyond) $5,500 * $5,500 $5,500 $2,000 $7,500 Independent Undergraduate
(and dependant whose parents are unable to borrow under the Plus Loan Program.01 (1st year) $3,500 $4,000 $7,500 $3,500 $6,000 $9,500 02 (2nd year) $4,500 $4,000 $8,500 $4,500 $6,000 $10,500 03 (3rd year and beyond) $5,500 $5,000 $10,500 $5,500 $7,000 $12,500 Graduate and Professional Students $8,500 $12,000 $20,500 $8,500 $12,000 $20,500 Aggregate Limits Dependant Undergraduates $23,000 **** $23,000 No more than $23,000 Up to $31,500 $31,500 Independent Undergraduate* $23,000 $23,000 $46,000 No more than $23,000 Up to $57,500 $57,500 Graduate and Professional Students** $65,500 $73,000 $138,500 No more than $65,500 Up to $138,500 $138,500 * If a student doesn't demonstrate financial need for a Subsidized Stafford Loan, he may receive up to the entire amount in Unsubsidized Stafford Loans, assuming he has remaining eligibility for the loans. For dependent students whose parent cannot borrow under the PLUS program, the amount a student can borrow under the unsubsidized program is the same as for an independent student. Although loans received for graduate study are not counted towards a student's undergraduate aggregate loan limit, the combined loan amounts received for undergraduate and graduate programs may not exceed the allowable aggregate loan limits for a graduate or professional student.
Federal Parents PLUS Loans are available for parents who meet certain credit guidelines and whose child is a dependent undergraduate student as defined by the US Department of Education. Eligibility is not based on financial need. Parents may use this loan to pay the entire cost of attendance minus any other financial aid received by their dependent undergraduate student. Repayment is due to commence within 60 days after the loan is fully disbursed, although deferment of payment may be available through select lenders. This loan does not have a grace period as the other FFELP loans do.
Federal Graduate PLUS Loans are available for graduate and professional students. Before July 1st, 2006, this loan was only available to the parents of dependent undergraduate students. Graduate students may borrow this loan to cover the difference between cost of attendance and all other awarded aid after applying for other Stafford aid. This loan has a federal credit check process. The review looks for bad credit only. You do not have to meet other financial standards as with other private alternative loans. Repayment is due to commence within 60 days after the loan is fully disbursed, although deferment of payment may be available. This loan does not have a grace period as the other FFELP loans do.
For PLUS loans, for parents and for graduate students, disbursed on or after July 1st, 2006 the interest rate is fixed at 8.5%.
The maximum PLUS loan amount that a parent or graduate and professional degree student can borrow is the student's cost of attendance as calculated by the University minus any other financial aid the student receives.
Alternative Loans (private, non-governmental) are available if you need additional sources of funding. You may borrow up to the cost of attendance minus any financial aid that you receive for that year. Alternative loans have different interest rates, fees and repayment options than US government loans. A co-signer may also be required. Some lenders offer borrower benefits that reduce your loan balance or lower your interest rates. If you are not registered in a degree program, you may still apply for alternative loans. Please keep in mind that it is your decision which loan product you choose. The FAAO will certify any alternative loan that you choose provided the organization understands that you are attending an institution outside of the US.
Rights and Responsibilities
You must:
Repay your loan. Your obligation to repay becomes legally binding when you sign the Master Promissory Note (MPN) and authorize the electronic transfer of funds to your student account. Your requirement to repay does not go away because you; don't complete your educational program, cannot find employment, were not satisfied with the education or other services your received from the University, or were notified that your loan was sold to another party by your lender.
If you withdraw from the University, you may be required to repay part of or all your loan(s). You may also owe the University any loan funds returned on your behalf. The US Department of Education regulations state that a school must return loan funds if a student has not completed a minimum of 60% of the payment/enrolment period. If you received more loan funding than was "earned," the excess funds must be returned by the school and/or the student. The amount of money to be returned is determined by a specific formula that is used in a calculation called a "Return to Title IV." If you did not receive all of the funds that were earned, you may be eligible for a post-withdrawal disbursement. Further information is available HERE [pdf].
Make a Minimum Payment. A minimum monthly loan payment is required. This minimum amount varies depending on the amount you borrow and your repayment plan.
Pay on Time. You must make your payments on time unless you have made special arrangements with the lender or servicer. Many lenders offer repayment incentives to reward you for paying on time.
Notify the lender about changes. Let them know if you change your name, address, contact information, driver's license number or Social Security Number. You must also inform them if you withdraw from the University or drop below half-time status.
Complete a Master Promissory Note (MPN). When you decide to enter into an agreement with a particular lender for your student loan, you will sign an MPN. This document explains the terms and conditions of your loan in full detail. It also serves as the legal document requiring you to repay the loan with interest. Read through the entire promissory note before you sign it and make sure you understand your rights and responsibilities. The MPN is valid for a maximum of one year when attending a university outside the US. You must provide the original MPN to the school. It is important to keep a copy of your MPN in your files.
Your lender must provide you with:
A Notice of Guarantee and Disclosure Statement. This will be given to you before or at the time your loan is disbursed. This document states the amount of your loan (principal), and any fees deducted from the principal. It also discloses the interest rate, the annual percentage rate, and an estimate of the total amount you will have to repay (including the total amount of interest based on a standard repayment plan). It is also important to keep a copy of this document in your files.
A Repayment Schedule. Your lender or servicer will send this to you during your grace period. This document states the number and amount of monthly payments and the date when the first payment is due. At the same time, you will receive information about other repayment options.
A Notification of Loan Transfer. You will receive this if your lender sells or transfers your loan to another lender or servicer and if it changes where your loan payments are sent. This document contains addresses, phone numbers, and other information needed to make payments and keep in touch with the new lender or servicer of the loan. The terms of your loan will not change if your loan is sold or transferred.
Satisfactory Academic Progress
As a student loan recipient, you are required to be in good standing, maintain satisfactory academic progress toward your degree requirements for each semester in which you are enrolled and complete your degree in the prescribed period according to your program. Satisfactory Academic Progress (SAP), as described below, is evaluated twice each year, in January and June. Failure to maintain satisfactory progress may result in the cancellation of your financial aid, and you may have to repay any funds already received.
Basic Standard for Satisfactory Academic Progress. To achieve SAP as per the US Department of Education, you must:
- Maintain a minimum annual GPA of 2.0.
- Maintain a minimum cumulative completion rate of two-thirds of credits attempted (67%).
- Complete your educational program within a time frame no longer than 150% of its published length. (For example, completing the program after attempting a maximum of 180 credits for a 120-credit program).
Federal regulations require that the University tracks the academic progress of student loan recipients from the first date of enrolment at Concordia University, whether or not loans were received at that time. Credits transferred from all other credit sources will be considered as attempted and completed credits in the evaluation of the completion rate standards, but these courses do not affect the calculation of your GPA.
If your attempted credits, including transfer credits, exceed the 150% time frame, a you will be placed on Student Loan Denied status, not Student Loan Probation. No financial aid will be disbursed to you during subsequent semesters unless you make an appeal of the Student Loan Denied and the appeal is granted. If you have completed your degree requirements, but are still attending courses, you are not eligible to continue to receive aid even if you are below the maximum time frame.
Concordia University satisfactory academic progress. In order to be eligible for US loans, you must also meet Concordia University's institutional requirements for minimum satisfactory performance. These are defined in the Undergraduate and the Graduate Calendar under each Faculty's section. Note that you must maintain a minimum annual GPA of 2.0 in all Faculties.
DISC, INC, MED, DEF, AU, F/FNS/R/NR & S Grades, and repeated course work will be treated as follows:
- Course withdrawals (DISC) after the drop/add period are not included in the GPA calculation but are considered as non-completion of attempted course work.
- Incomplete (INC) indicates that you have not completed required course work and that the instructor has agreed to accept the work after the due date. The notation is always used in combination with a letter grade such as B/INC and the grade is used in the calculation of the various GPAs.
- Medical (MED) indicates that you have been unable to write a final examination or complete other assignments due to a long-term medical situation. A MED notation carries no grade point value.
- Deferred (DEF) indicates that you have been unable to write a final examination. A DEF notation carries no grade point value.
- An audit (AU) grade is not considered attempted course work. It is not included in the GPA calculation or completion rate determinations.
- F/FNS/R/NR grades are treated as attempted credits that were not earned, and so are included in both the calculation of GPA and minimum completion rate.
- A satisfactory grade (S) is treated as attempted credits that are earned, but is not included in calculation of GPA.
- In case of repeated courses, only the grade corresponding to the latest attempt of the course will be used in calculation of the various GPAs, but every repeated attempt will be included in the completion rate determinations. No loans can be disbursed for a repeated attempt if you have already achieved a passing grade for that course. The University's policy means that you receive aid for only one repeat of a course.
Student Loan Probation Status. If you fail to meet the minimum 2.0 annual Grade Point Average standard, or fail to complete at least two-thirds of cumulative credits attempted, you will be placed on Student Loan Probation for the subsequent semesters until the next evaluation of Satisfactory Academic Progress (in January and June).
Loans can be received during the semesters of probation. Loan disbursements for the next period of enrolment will be held until the grades and course completions have been reviewed for the semesters of Student Loan Probation.
Student Loan Denied Status. While you are on Student Loan Probation or on Student Loan Denied status, you must maintain the minimum completion rate and/or a minimum annual GPA of 2.0 or better. Failing to do so will place you on Student Loan Denied status for subsequent semesters. No financial aid will be disbursed during subsequent semesters until you are removed from Student Loan Denied status.
If you fail to satisfy the 150% requirement, you will also be placed on Student Loan Denied status. No aid will be disbursed during subsequent semesters unless you have made an appeal and the appeal is granted for that semester. There are no exceptions to this requirement. If you are in a 120-credit bachelor degree program and have attempted in excess of 180 credits including transfer credits, you are no longer eligible for financial aid. There is no probationary period once the 150% standard has been exceeded.
Reinstatement of Aid After Student Loan Denied Status. Reinstatement of financial aid after you have been placed on Student Loan Denied status may be achieved in one of the following ways:
- You submit a written letter of appeal in accordance with the appeal process, and the FAAO grants the appeal. You are placed on Student Loan Probation for the semester/term rather than on Student Loan Denied status.
- You attend Concordia University, pay for tuition and fees without the help of student financial aid, and do well enough in the course work to meet all the Satisfactory Academic Progress standards. You regain aid eligibility in a probationary status. If you are on Student Loan Denied status for failure to meet the 150% requirement, you cannot regain eligibility this way.
If your attempted credits have exceeded 150% of your program, you cannot regain financial aid eligibility except through the appeals process and on a semester by-semester or term-by-term basis.
Appeal Process: The law governing federal student aid allows Concordia to set aside the Satisfactory Academic Progress (SAP) standards for individual students on a case-by-case basis if it can be determined that an unusual or extraordinary situation affected the student's academic progress. If this situation applies to you, then you may appeal your SAP loan denied status.
Appeals must be:
- Submitted in writing to the Director of the Financial Aid and Awards Office(FAAO) by the date specified in the Student Loan Denied notification letter.
- Your appeal is strengthened by documents which support your unusual or extraordinary situation (i.e. death of a family member is supported by a death certificate). In addition, your statement should also include a specific plan for your academic recovery.
Appeals will be reviewed by committee composed of the Director of Financial Aid and Awards and two financial aid professionals. The FAAO will notify you in writing of its decision within 14 working days of the review. All decisions made by the FAAO are final.
Should you require additional information regarding this process please visit the Financial Aid and Awards Office for additional information.
Glossary
Award Year: The 12-month period during which you attend the University, and for which your aid has been awarded.
Capitalization: The process by which interest is added to the principal loan amount if you choose not to make interest payments while at the University or in forbearance. This process increases the amount that must be repaid and will make your monthly payment larger.
Cost of Attendance (COA): The total amount it will cost you to go to school. This amount includes tuition fees, living expenses, books, insurance, travel and transportation. The COA is determined by the FAAO, using US guidelines.
Default: The failure of a borrower to repay the loan under the terms of the promissory note. If your repayment instalments are monthly, you are considered in default if you do not pay for 270 consecutive days. If your instalments are less frequent, default is declared after 330 consecutive days of non-payment.
Deferment: The temporary postponement of loan payments; during this time, you do not have to pay either principal or interest.
Delinquency: The status of a loan when payment is late. Delinquency can lead to default.
Disbursement: The lender's payment of loan funds to the University. Payment is made by cheque. Disbursement is usually made in two or more instalments during the year in accordance with US Department of Education regulations.
Expected Family Contribution (EFC): The amount that you and family are expected to contribute toward the Cost of Attendance. This amount is based on your or your family's income and assets.
Free Application for Federal Student Aid (FAFSA): The application that you must file to apply for financial aid. The FAFSA is printed and distributed free of charge by the U.S. Department of Education. It is also available online at www.fafsa.ed.gov.
Federal Family Education Loan Program (FFELP): The umbrella program for loans made through private lenders and guaranteed by the US government. It includes Federal Stafford Loans (subsidized and unsubsidized), Federal PLUS Loans (for parents or graduates) and Federal Consolidated Loans.
Forbearance: The temporary postponement or reduction of payments because of the borrower's financial difficulties. Forbearance may also be an extension of the repayment period. You are charged interest during forbearance.
Full-time: Enrolment in twelve or more credits per semester.
Grace Period: A period of time between when you graduate or drop below half-time status and when repayment begins. For Stafford Loans, the grace period is six-months. There is no grace period for PLUS Loans. If you re-enter school at least half-time during your grace period, the grace period is renewed for another six months. Therefore, you have the full grace period available when you leave school again. However, if you use all your grace period at once and re-enter school, you will not be eligible for another grace period.
Guarantee Fee: An optional fee charged by some guarantee agencies and deducted from loan proceeds prior to disbursement. This fee helps offset the administrative costs, and can equate to up to 1% of your student aid.
Half-time: Enrolment in six or more credits per semester.
Interest: The fee that is charged by the lender in exchange for lending the money, the interest rate, usually expressed as a percentage of the loan amount, may stay the same for the term of the loan (fixed rate) or it may change periodically (variable rate). Interest rates for Stafford loans are fixed, whereas those of alternative loans may vary.
Loan Holder: The organization that currently "holds" the loan and to which you owe repayment. Many banks sell loans, so the initial lender and the current holder could be different.
Master Promissory Note (MPN): A legally binding contract that you sign, thereby agreeing to repay the loan. It contains the loan terms and conditions, including how and when the loan must be repaid.
Origination Fee: A fee charged by the lender with the approval of the US government and deducted from the loan funds prior to disbursement. The fee is used to offset administrative costs.
Principal: The total sum borrowed. This includes the original amount borrowed plus any interest that has been capitalized. Additional interest charges are based on this amount.
Student Aid Report (SAR): Report of the information you provided in the FAFSA. It contains your EFC.
Secondary Market: An agency that purchases student loans from originating lenders so these lenders can make additional loans. If such an organization buys the loan, that organization becomes the "loan holder."
Subsidized Loan: A loan made on the basis of financial need. The federal government pays the interest on these loans while you are enrolled at least half-time, during the grace period, or during authorized periods of deferment.
Unsubsidized Loan: A loan not based on financial need. You are responsible for paying all interest that accrues throughout the life of an unsubsidized loan. During in-school status, deferment, and forbearance periods, you may choose to pay the interest charged on the loan or allow the interest to be capitalized.