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Stafford Loans

Federal Direct Student Loan Program

UMUC participates in the William D. Ford Federal Direct Student Loan program, which offers long-term, low interest loans from the U.S. Department of Education. This is the largest federal aid program and are the programs you are most likely to find in your aid offer. 

Subsidized and Unsubsidized Loans

There are two types of Federal Direct Student Loans: subsidized and unsubsidized.  The primary difference is the point at which interest begins to accrue. 

Subsidized Loans
No interest will accrue on a subsidized loan and no principle will be due until the end of the 6-month grace period that will begin when you graduate, leave the university, or drop below half-time enrollment (6 units). Subsidized loans are awarded to students who demonstrate financial need.

Unsubsidized Loans
Interest on an unsubsidized loan begins on the day that the loan is disbursed and continues until the day that you repay the loan in full.  You can pay the accumulating interest while you are in school, during the grace period, or during deferment; or you have the option of capitalizing the interest (adding unpaid, accumulated interest to the total unsubsidized amount borrowed when you begin repayment). This may give you a way to postpone making interest payments, but it also increases the total cost of your unsubsidized loan.

Your Financial Aid Award may include a combination of subsidized and unsubsidized loans. For example, a freshman with a subsidized loan of $500 may also receive an offer of an unsubsidized loan for $3,000 to meet the annual limit for a freshman.

Annual and Aggregate Loan Maximums

DIRECT LOAN ANNUAL LIMITS
The amount you can borrow annually depends on your grade level, as determined by your earned units.

Grade Level	Earned Units	Annual Loan Limit
Freshman	0-29	$3,500
Sophomore	30-59	$4,500
Junior	60-89	$5,500
Senior	90+	$5,500
Graduate	N/A	$8,500

You may receive an additional amount of unsubsidized loan if you meet the Federal Title IV definition of an independent student.  Independent freshmen and sophomores may be eligible for up to $4,000 in additional loan funds; juniors or seniors: up to $5,000; and graduate students: up to $12,000. 

You are independent if you meet at least one of the following conditions: 

• You will be 24 years of age on or before December 31 of the academic year during which you receive the student financial aid;
• You are a veteran of the U.S. Armed Forces;
• You are an orphan or were a ward of the court until the age of 18;
• You are a graduate student or were married at the time of application for aid;
• You have children or other dependents who receive more than half of their support from you now and through June 30 of the year in which you receive the student financial aid.
• You are currently serving on active duty in the Armed Forces for other than training purposes.

DIRECT STUDENT LOAN MAXIMUMS

The Federal Direct Student Loan Program also has limits on the total amount you can borrow.

Students	Undergraduate	Graduate
Dependent	$23,000	N/A
Independent	$46,000	$138,500*

*Includes all borrowing at the undergraduate level

The Cost of Borrowing

You will pay 2.5 percent of your Direct Student Loan proceeds to the U.S. Department of Education as a loan origination fee.  This fee will be deducted from each disbursement before it is credited to your university account. 

The Interest Rate

New loans made on or after July 1, 2006 have a fixed interest rate of 6.8 percent. The interest rate for 2008-2009 borrowers will be 6.0 percent.  (Loans disbursed prior to that date will continue to carry variable interest rates that adjust annually on July 1, based on the rate of the 91 day-Treasury bill, not to exceed 8.25 percent.)

The U.S. Department of Education gives an "up front" interest rebate of 1.5 percent as a repayment incentive to Direct Loan borrowers.  To keep the up-front interest rebate, borrowers must make their first twelve required monthly payments on time.  If the borrower does not make all twelve payments on time, the Department will add the rebate amount back to the principal balance on the borrower's loan account. 

The U.S. Department of Education's Direct Loan Servicer will send you a quarterly loan interest statement. 

Entrance Loan Counseling

When you are a new borrower of a Federal Direct Student Loan at UMUC, you must complete an entrance loan counseling session so that you will know your rights and responsibilities as a borrower.  The online session will take you about 20 minutes to complete. You will only need to complete this information once.

• Online Federal Direct Student Loan Entrance Loan Counseling

Promissory Note

Borrowing from the Direct Loan program requires the completion of an Electronic Master Promissory Note (e-MPN). While attending UMUC you can use the E-MPN for multiple loans over one or more academic years. You will only need to complete this information once.

• Electronic Master Promissory Note (e-MPN)

Repayment

You will begin to repay your loan at the end of a 6-month grace period that begins when you graduate, leave school, or drop below half-time enrollment (6 units).

Repayment Options

Borrowers have four repayment options.

• The Standard Repayment Plan allows you to repay your loan with a fixed monthly payment of no less than $50 over a period of no more than 10 years. See Appendix IV.
  
  
• The Extended Repayment Plan also has minimum payments of $50 per month, but allows you to take from 12 to 30 years to repay your loans.
  
  
• The Graduated Repayment Plan allows your payments to start out at one level, and then gradually increase every two years.
  
  
• The Income Contingent Repayment Plan gives you the flexibility to tie your payments to your Adjusted Gross Income.

You can estimate your monthly payments with various repayment plans by using the repayment calculators available online from the U.S. Department of Education’s Direct Loan Web site.

• Calculators

You may consider a Federal Direct Consolidation Loan to simplify repayment by combining loans from the Federal Direct Student Loan Program, the Federal Stafford Loan Program, and the Federal Perkins Loan Program.  (Towson University does not participate in the Federal Stafford Loan Program.)

• Consolidation Loans

If you have questions about repayment or a problem making a payment on your loan, the Direct Loan Servicing Center (1-800-848-0979) will work with you to help you avoid the costs and adverse consequences of delinquency.  Deferment and forbearance are options that can help you manage the repayment of your loan.

• Deferments and Cancellations