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Finding Out About Student Aid

The Student Guide tells you about federal student financial aid (SFA) programs and how to apply for them. Education or training after high school costs more than ever, and you need to learn about as many sources of aid as you can. Sources you can use to find out about student aid include:

• The financial aid administrator (FAA) at each school in which you're interested can tell you what aid programs are available there and how much the total cost of attendance will be.
  
  
• The state higher education agency in your home state can give you information about state aidÑincluding aid from the State Student Incentive Grant (SSIG) Program, which is jointly funded by individual states and the U.S. Department of Education.
  
  
• The agency in your state responsible for public elementary and secondary schools can give you information on the Robert C. Byrd Honors Scholarship Program (Byrd Program). To qualify for aid under the Byrd Program, you must demonstrate outstanding academic achievement and show promise of continued academic excellence.

For the address and telephone number of the appropriate state agency, contact your school's financial aid office or call: 1-800-4-FED-AID (1-800-433-3243).

• The AmeriCorps program provides full-time educational awards in return for work in community service. You can work before, during, or after your postsecondary education, and you can use the funds either to pay current educational expenses or to repay federal student loans. For more information on this program, call 1-800-942-2677 or write to: The Corporation for National and Community Service, 1201 New York Avenue, N.W., Washington, DC 20525.
  
  
• Your public library is an excellent source of information on state and private sources of aid.
  
  
• Many companies, as well as labor unions, have programs to help pay the cost of postsecondary education for employees, members, or their children.
  
  
• Check foundations, religious organizations, fraternities or sororities, and town or city clubs. Include community organizations and civic groups such as the American Legion, YMCA, 4-H Club, Elks, Kiwanis, Jaycees, Chamber of Commerce, and the Girl or Boy Scouts.
  
  
• Don't overlook aid from organizations connected with your field of interest (for example, the American Medical Association or the American Bar Association). These organizations are listed in the U.S. Department of Labor's Occupational Outlook Handbook and are also listed in various directories of associations available at your public library.
  
  
• If you (or your spouse) are a veteran or the dependent of a veteran, veterans educational benefits may be available. Check with your local Veterans' Affairs office.

General Information

The U.S. Department of Education has the following major student financial aid (SFA) programs:

• Federal Pell Grants
• Federal Stafford Loans
• Federal PLUS Loans
• Federal Consolidation Loans
• Federal Supplemental Educational Opportunity Grants (FSEOG)
• Federal Work-Study (FWS)
• Federal Perkins Loans

Grants are financial aid you don't have to pay back.

Work-Study lets you work and earn money to help pay for school.

Loans are borrowed money that you must repay with interest.

Undergraduates may receive all three types of financial aid. Graduate students may receive loans or Federal Work-Study, but not Federal Pell Grants or FSEOG. Not all schools take part in all the programs. To find out which ones are available at a particular school, contact the financial aid office.

Student Eligibility

To receive aid from the major student aid programs discussed in the Guide, you mustÑ

• have financial need, except for some loan programs. (See below.)
  
  
• have a high school diploma or a General Education Development (GED) Certificate, pass a test approved by the U.S. Department of Education, or meet other standards your state establishes that are approved by the U.S. Department of Education. See your financial aid administrator for more information.
  
  
• be enrolled or accepted for enrollment as a regular student working toward a degree or certificate in an eligible program. (You may not receive aid for correspondence or telecommunications courses unless they are part of an associate, bachelor's, or graduate degree program.)
  
  
• be a U.S. citizen or eligible noncitizen.
  
  
• have a valid Social Security Number.
  
  
• make satisfactory academic progress.
  
  
• sign a statement of educational purpose and a certification statement on overpayment and default (both found on the Free Application for Federal Student Aid (FAFSA)).
  
  
• register with the Selective Service, if required.

Financial Need

Aid from most of the major programs discussed in the Guide is awarded on the basis of financial need (except for unsubsidized Stafford, all PLUS and Consolidation loans).

When you apply for federal student aid, the information you report is used in a formula, established by the U.S. Congress, that calculates your Expected Family Contribution (EFC), an amount you and your family are expected to contribute toward your education. If your EFC is below a certain amount, you'll be eligible for a Federal Pell Grant, assuming you meet all other eligibility requirements.

There isn't a maximum EFC that defines eligibility for the other financial aid programs. Instead, your EFC is used in an equation to determine your financial need:

Your financial aid administrator (FAA) calculates your cost of attendance (COA), and subtracts the amount you and your family are expected to contribute toward that cost. If there's anything left over, you're considered to have financial need. In determining your need for aid from the SFA programs, your FAA must first consider other aid you're expected to receive.

Your FAA can adjust the EFC formula's data elements or adjust your COA if he or she believes your family's financial circumstances warrant it based on the documentation you provide. However, the FAA does not have to make such an adjustment. See Special Circumstances for more information.

You can get a booklet called the "Expected Family Contribution (EFC) Formulas," which describes how the EFC formulas are calculated, by writing to:

Federal Student Aid Information Center
P.O. Box 84
Washington, DC 20044

Dependency Status

When you apply for federal student aid, your answers to certain questions will determine whether you're considered dependent on your parents -- and must report their income and assets as well as your own -- or whether you're independent and must report only your own income and assets (and those of your spouse, if you're married).

Students are classified as dependent or independent because federal student aid programs are based on the idea that students (and their parents or spouse, if applicable) have the primary responsibility for paying for their postsecondary education. Students who have access to parental support (dependent students) should not receive need-based federal funds at the expense of students who do not have such access (independent students).

You're an independent student if at least one of the following applies to you:

• you were born before January 1, 1973;
• you're married;
• you're enrolled in a graduate or professional educational program;
• you have legal dependents other than a spouse;
• you're an orphan or ward of the court (or were a ward of the court until age 18); or
• you're a veteran of the U.S. Armed Forces.

If you claim to be an independent student, your school may ask you to submit proof before you can receive any federal student aid. If you think you have unusual circumstances that would make you independent even though none of the above criteria apply to you, talk to your aid administrator. He or she can change your status if he or she thinks your circumstances warrant it based on the documentation you provide. But remember, the aid administrator won't automatically do this. That decision is based on his or her judgment, and it's final--you can't appeal it to the U.S. Department of Education.

Applying

What form do I use?
If you did not apply for federal student aid for the 1995-96 school year, you can apply for federal aid for the 1996-97 school year either by completing and mailing the 1996-97 Free Application for Federal Student Aid (FAFSA), by applying electronically (through your school), or by using the U.S. Department of Education's new FAFSA Express software. You can get a FAFSA from your school or from the Federal Student Aid Information Center.

If you did apply for federal student aid for the 1995-96 school year, you probably will be able to file a 1996-97 Renewal Free Application for Federal Student Aid (Renewal FAFSA). You'll either receive it at your home address or from your school. (You may also be able to file a Renewal FAFSA electronically.) Not all schools have electronic application capability; check with your school or the schools that interest you.

If you qualify to use the Renewal FAFSA, you'll have fewer questions to answer. Most of the information on the form will be preprinted and will be the same as the information you gave in 1995-96 (plus any of your corrections that were processed). You'll only have to write in some new information and information that has changed since 1995-96 (for example, family size). Check with your aid administrator if you have questions about the Renewal FAFSA.

For most of the federal student aid programs, the FAFSA (or Renewal FAFSA) is the only form you need to file. To receive a Federal Family Education Loan (FFEL) Stafford Loan or a PLUS Loan, you will have to complete additional forms.

Remember, applying for federal student aid is FREE.

However, to be considered for nonfederal aid, such as institutional aid, you may have to fill out additional forms and pay a processing fee. Check with your school to see which nonfederal application to fill out, if any.

Read the instructions carefully when you complete the FAFSA or the Renewal FAFSA. Most mistakes are made because students don't follow instructions. Pay special attention to any questions on income, because most errors occur in this area.

When you apply, you should have certain records on hand. These records are listed on the application. You should save all records and all other materials used in completing the application because you may need them later to prove that the information you reported is correct. This process is called verification.

If verification is required, and you don't provide it, you won't receive aid from the SFA programs, and you might not receive aid from other sources. You should make a photocopy of your application before you submit it. This way, you have a copy of the data you submitted for your own records. So be sure you keep all documents, and that the information you report is accurate!

When do I apply?
Apply as soon AFTER January 1, 1996 as possible. (You can't apply before this date.) It's easier to complete the application when you already have your tax return, so you may want to consider filing your taxes as early as possible. Do not sign, date, or send your application before January 1, 1996. If you apply by mail, send your completed application using the envelope that came with it. It is already addressed, and using it will ensure that your application reaches the correct address.

NOTE: You must reapply for federal aid every year. Also, if you change schools, your aid doesn't go with you. Check with your new school to find out what steps you must take to continue receiving aid.

What happens after I apply?
If you apply by mail, your application will be processed in approximately four weeks. Then, you'll receive a Student Aid Report (SAR) in the mail. The SAR will report the information from your application and, if there are no questions or problems with your application, your Expected Family Contribution (the number used in determining your eligibility for federal student aid). Each school you listed on the application may also receive your application information if the school participates electronically.

If you apply electronically, your application will be processed in about a week. The results will be sent electronically to your school. You'll also receive a SAR in the mail.

When you receive the SAR, you must review it carefully to make sure it's correct. If any changes are necessary, your school may submit the corrections electronically, or, if you applied by mail, you may make corrections on Part 2 of the SAR and return it to the address given at the end of Part 2.

If the data are correct and you don't need to make changes, you can receive financial aid on the basis of that information. If your school has not received your application information electronically, you must take your SAR to the school.

If it's been more than four weeks since you mailed in your application and you haven't heard anything, you can check on your application by calling 1-319-337- 5665 (Monday - Friday, 9:00 a.m. to 8:00 p.m., Eastern Time). Or, you can write to:

Federal Student Aid Information Center
P.O. Box 84
Washington, DC 20044

You can also use this phone number and address to request a duplicate copy of your SAR, or you can request a duplicate copy by writing to the address given at the end of Part 2 of the SAR. You'll receive the duplicate SAR in 2-3 weeks.

If you write, make sure you include in your letter your full name, permanent address, Social Security Number, date of birth, and signature.

Your duplicate SAR will be sent to the address you reported on your application. If your address has changed since then, you can correct your address by writing to the FAFSA processor where you sent your application or to the Federal Student Aid Information Center at the address given above. You can't change your address over the phone because your signature is required.

Special Circumstances

Although the process of determining a student's eligibility for federal student aid is basically the same for all applicants, there is some flexibility. For instance, if your financial aid administrator (FAA) believes it's appropriate, based on the documentation you provided, he or she can change your status from dependent to independent.

In some cases, your FAA may adjust your cost of attendance (COA) or the income information used to calculate your Expected Family Contribution (EFC) to take into account circumstances that might affect the amount you and your family are expected to contribute toward your education. These circumstances could include a family's unusual medical or dental expenses, or tuition expenses for children attending a private elementary or secondary school. Also, an adjustment may be made if you, your spouse, or either of your parents (if applicable) have been recently unemployed. If conditions such as these apply to you or your family, contact your FAA.

Check with your FAA if you feel you have any other special circumstances that might affect the amount you and your family are expected to contribute. But remember, there have to be very good reasons for the FAA to make any adjustments, and you'll have to provide adequate proof to support those adjustments. Also, remember that the FAA's decision is final and cannot be appealed to the U.S. Department of Education.

Deadlines

Application Submission
Whether you apply electronically or by mail, your application must be received by the application processor by June 30, 1997 for the 1996-97 school year.

THERE ARE NO EXCEPTIONS TO THIS DEADLINE.

Apply as soon AFTER January 1, 1996 as you can. (Do not sign, date, or send your application before this date.) Schools often set deadlines early in the calendar year. Students must meet these deadlines to receive certain types of funds, including Federal Supplemental Educational Opportunity Grant (FSEOG), Federal Work-Study, and Federal Perkins Loan program funds.

SAR Submission
Your correct, complete application information must be at your school by your last day of enrollment in 1996-97 or by August 29, 1997, whichever is earlier (see your FAA). If your school has not received your application information electronically, you must submit your SAR to the school by the appropriate deadline. Be sure you know your last day of enrollment in 1996-97--it may be earlier than August 29.

NOTE: If you're selected for verification, additional deadlines apply to you. Your financial aid administrator can tell you what they are.

Telephone Numbers

If you need answers right away to questions about federal student aid, call the appropriate number listed below at the Federal Student Aid Information Center between 9:00 a.m. and 8:00 p.m. (Eastern Time), Monday through Friday:

1-800-4-FED-AID (1-800-433-3243), this is a toll-free number.

The Information Center will:

• assist you in completing the FAFSA
• tell you whether a school participates in the federal student aid programs, and that school's default rate.
• explain federal student aid eligibility requirements.
• explain the process of determining financial need and awarding aid.
• send federal student aid publications to you.

1-319-337-5665

Call this number at the Information Center if you want to find out if your federal student financial aid application has been processed or if you want a copy of your Student Aid Report (SAR). Please note that you'll have to pay for this call. Collect calls cannot be accepted, and this service is not available on the toll-free number given above.

1-800-730-8913

If you're hearing-impaired you may call this toll-free TDD number at the Information Center for help with any federal student aid questions you may have.

1-800-MIS-USED (1-800-647-8733)

If you have reason to suspect any fraud, waste, or abuse involving federal student aid funds, you may call this toll-free number, which is the hotline to the U.S. Department of Education's Inspector General's office. You may remain anonymous, if you wish.

Federal Pell Grants

What is a Federal Pell Grant?
A Federal Pell Grant, unlike a loan, does not have to be repaid. Pell Grants are awarded only to undergraduate students who have not earned a bachelor's or professional degree. (A professional degree would include a degree in a field such as pharmacy or dentistry.) For many students, Pell Grants provide a foundation of financial aid to which other aid may be added.

How do I qualify?
To determine if you're eligible financially, the U.S. Department of Education uses a standard formula, established by Congress, to evaluate the information you report when you apply. The formula produces an Expected Family Contribution (EFC) number. Your Student Aid Report (SAR) contains this number and will tell you if you're eligible.

How much money can I get?
Awards for the 1996-97 award year (July 1, 1996 to June 30, 1997) will depend on program funding. The maximum award for the 1995-96 award year was $2,340. You can receive only one Pell Grant in an award year. How much you get will depend not only on your EFC, but on your cost of attendance, whether you're a full-time or part-time student, and whether you attend school for a full academic year or less. You may not receive Pell Grant funds from more than one school at a time.

How will I be paid?
Your school can either credit the Pell Grant funds to your school account, pay you directly (usually by check), or combine these methods. The school must tell you in writing how and when you'll be paid and how much your award will be. Schools must pay you at least once per term (semester, trimester, or quarter). Schools that do not use formally defined, traditional terms must pay you at least twice per academic year.

Can I receive a Federal Pell Grant if I am enrolled less than half time?
Yes, if you're otherwise eligible. You won't receive as much as if you were enrolled full time, but your school must disburse your Pell Grant funds in accordance with your enrollment status and cannot refuse you an award simply because you're enrolled less than half time.

Federal Stafford Loans

What kinds of Stafford loans are available?
Stafford Loans are either subsidized or unsubsidized. A subsidized loan is awarded on the basis of financial need. The federal government pays interest on the loan ("subsidizes" the loan) until you begin repayment and during authorized periods of deferment.

An unsubsidized loan is not awarded on the basis of need. You'll be charged interest from the time the loan is disbursed until it is paid in full. If you allow the interest to accumulate, it will be capitalized--that is, the interest will be added to the principal amount of your loan and will increase the amount you have to repay. If you choose to pay the interest as it accumulates, you'll repay less in the long run.

You can receive a subsidized Stafford Loan and an unsubsidized Stafford Loan for the same enrollment period.

Who can get a Stafford Loan?
If you're a regular student enrolled in an eligible program of study at least half time, you may receive a Stafford Loan. You must also meet other general eligibility requirements.

How much can I borrow?
If you're a dependent undergraduate student you can borrow up to--

• $2,625 if you're a first-year student enrolled in a program of study that is at least a full academic year;
• $3,500 if you've completed your first year of study, and the remainder of your program is at least a full academic year; or
• $5,500 a year if you've completed two years of study, and the remainder of your program is at least a full academic year.

If you're an independent undergraduate student or a dependent student whose parents are unable to get a PLUS Loan, you can borrow up to--

• $6,625 if you're a first-year student enrolled in a program of study that is at least a full academic year (at least $4,000 of this amount must be in unsubsidized loans);
• $7,500 if you've completed your first year of study, and the remainder of your program is at least a full academic year (at least $4,000 of this amount must be in unsubsidized loans); or
• $10,500 a year if you've completed two years of study, and the remainder of your program is at least a full academic year (at least $5,000 of this amount must be in unsubsidized loans).

For periods of study that are less than an academic year, the amounts you can borrow will be less than those just listed. Talk to your FAA to find out how much you can borrow.

NOTE: Stafford Loans are not made to students enrolled in programs that are less than one-third of an academic year.

If you're a graduate student, you can borrow up to $18,500 each academic year (At least $10,000 of this amount must be in unsubsidized Stafford loans.)

NOTE: The amounts given above are the maximum yearly amounts you can borrow in both subsidized and unsubsidized Stafford Loans. You may receive less than these yearly maximum amounts if you receive other financial aid that is used to cover a portion of your cost of attendance.

The total debt you can have outstanding from all Stafford Loans combined is--

• $23,000 as a dependent undergraduate student;
• $46,000 as an independent undergraduate student (no more than $23,000 of this amount may be in subsidized loans); or
• $138,500 as a graduate or professional student (no more than $65,500 of this amount may be in subsidized loans). The graduate debt limit includes any Stafford Loans received for undergraduate study.

What's the interest rate charged on these loans?
If you have a Stafford Loan that was first disbursed on or after July 1, 1994, the interest rate could change each year of repayment, but it will never exceed 8.25 percent. The interest rate is adjusted each year on July 1. You'll be notified of interest rate changes throughout the life of your loan.

If you had Stafford Loans that were first disbursed before July 1, 1994, the interest rate on these loans may be different. Check with the lender or agency that holds your loan.

If you have subsidized loans, the federal government pays the interest while you're enrolled in school at least half time, during a grace period, or during authorized periods of deferment. Interest will begin to accrue--that is, accumulate--when you enter repayment.

If you have unsubsidized loans, you'll be charged interest from the day the loan is disbursed until it is repaid in full, including in-school, grace, and deferment periods. You may choose to pay the interest during these periods or it can be capitalized.

Is there a charge for these loans?
You'll pay fees of up to 4 percent, deducted proportionately from each disbursement of your loan. For an FFEL Stafford Loan, a portion of this fee goes to the federal government to help reduce the cost of the loans. For a Direct Stafford Loan, all of this fee goes to the government. Also, if you don't make your loan payments when they're scheduled, you may be charged collection costs and, for FFEL Stafford Loans, late fees.

When do I pay back these loans?
After you graduate, leave school, or drop below half-time enrollment, you have six months before you begin repayment. This is called a "grace period."

During the grace period on a subsidized loan, you don't have to pay any principal, and no interest will be charged. During the grace period on an unsubsidized loan, you don't have to pay any principal, but interest will be charged. You can either pay the interest or allow it to accumulate.

After you leave school or drop below half-time enrollment, you'll receive information about repayment and will be notified of the date repayment begins. However, you're responsible for beginning repayment on time, even if you don't receive this information.

Is it ever possible to postpone repayment of my loan?
Yes. Under certain circumstances, you can receive a deferment or forbearance on your loan. A deferment allows you to temporarily postpone payments on your loan. If you have a subsidized loan, the federal government will pay the interest that accrues during the deferment. If your loan is unsubsidized, you will be responsible for the interest on the loan during the deferment. If you don't pay the interest as it accrues, it will be capitalized. See the Loan Deferment Summary for a list of deferments available if your loan was first disbursed on or after July 1, 1993. If your loans were disbursed prior to that date, the lender or agency holding your loans can tell you about the deferments that apply to those loans. You can't receive a deferment if your loan is in default.

If you are temporarily unable to meet your repayment schedule, but are not eligible for a deferment, you may receive forbearance for a limited and specified period. During forbearance, your payments are postponed or reduced. Whether your loans are subsidized or unsubsidized, the government does not pay the interest; you are responsible for it. If you don't pay the interest as it accrues, it will be capitalized.

You may be granted forbearance for reasons such as:

• being unable to pay due to poor health or other unanticipated personal problems
• serving in a medical or dental internship or residency
• serving in a position under the National Community Service Trust Act of 1993
• being obligated to make payments on federal student loans that are equal to or greater than 20 percent of your monthly gross income

Deferments and forbearances are not automatic. If you have a Direct Stafford Loan, you must contact the Direct Loan Servicing Center to request either option. If you have an FFEL Program Stafford Loan, you must contact the lender or agency that holds your loan. For either program, you'll have to provide documentation to support your request. You must continue making scheduled payments until you receive notification that the deferment or forbearance has been granted.

Can my Stafford Loan be discharged (canceled)?
Yes, in certain circumstances. A discharge releases you from all obligation to repay the loan. See the Discharge/Cancellation Summary for a complete listing of discharge conditions.

Your loan can't be discharged because you didn't complete the program of study at the school (unless you were unable to complete the program because the school closed), didn't like the school or the program of study, or didn't obtain employment after completing the program of study.

Repayment assistance (not a discharge, but another way to satisfy your obligation to repay) may be available for an FFEL Stafford Loan if you serve in the military. For more information, contact your recruiting officer.

For more information about discharge or repayment assistance, Direct Stafford Loan borrowers can contact the Direct Loan Servicing Center; FFEL Stafford Loan borrowers should contact the lender or agency that holds their loan.

Direct Stafford Loans

The processes of applying for a loan and paying funds to the borrower, as well as the methods of repayment, differ somewhat for Direct Stafford Loans and FFEL Stafford Loans.

How do I apply for a Direct Stafford Loan?
First, complete the 1996-97 Free Application for Federal Student Aid (FAFSA) or Renewal FAFSA. After your FAFSA is processed, your school will review the results and will inform you of your loan eligibility.

Second, complete the promissory note provided by your school or the Direct Loan Servicing Center. Remember, the promissory note is a legal document requiring you to repay the loan. Read it carefully before you sign.

NOTE: Your school can refuse to certify your loan application, or can certify a loan for an amount less than you would otherwise be eligible for, if the school documents the reason for its action and explains the reason to you in writing. The school's decision is final and cannot be appealed to the U.S. Department of Education.

How will I receive my Direct Stafford Loan?
The U.S. Department of Education will pay you through your school. In most cases, your loan will be disbursed in at least two installments; no installment can be greater than half the amount of your loan.

Your loan money must first be applied to your school account (if your school has an account for you) to pay for tuition and fees, room and board, and other school charges. If loan money remains, you'll receive the funds by check or in cash, unless you give the school written permission to hold the funds until later in the enrollment period.

If you're a first-year undergraduate student and a first-time borrower, your first payment may not be disbursed until 30 days after the first day of your enrollment period. This way, you won't have to repay the loan if you don't begin classes, or if you officially withdraw during the first 30 days of classes.

How do I pay back my Direct Stafford Loan?
The Direct Loan Program offers four repayment plans that are available to borrowers of Direct Stafford Loans. The repayment plans will be explained in more detail during entrance and exit counseling sessions at your school. The example repayment chart shows estimated monthly payments for various loan amounts under each of the plans.

You may choose one of the following repayment plans--

• The Standard Repayment Plan requires you to pay a fixed amount each month--at least $50--for up to 10 years. The length of your actual repayment period will depend on your loan amount.
  
  
• The Extended Repayment Plan allows you to extend loan repayment over a period that is generally 12 to 30 years, depending on your loan amount. Your monthly payment may be lower than it would be if you repaid the same total loan amount under the Standard Repayment Plan, but you'll repay a higher total amount of interest because the repayment period is longer. The minimum monthly payment is $50.
  
  
• Under the Graduated Repayment Plan, your payments will be lower at first and then increase every two years over a period of time generally ranging from 12 to 30 years. The actual length of your repayment period depends on your loan amount. Your monthly payment may range from 50 percent to 150 percent of what it would be if you were repaying the same total loan amount under the Standard Repayment Plan. However, you'll repay a higher total amount of interest because the repayment period is longer than it is under the Standard Repayment Plan.
  
  
• The Income Contingent Repayment Plan bases your monthly payment on your yearly income and your loan amount. As your income rises or falls, so do your payments. After 25 years, any remaining balance on the loan will be forgiven, but you may have to pay taxes on the amount forgiven.

Examples of Typical Beginning Payments for Direct Loan Repayment Plans Monthly and Total Payments Under Different Repayment Plans

Note: Payments are calculated using the maximum interest rate of 8.25%.

1. Assumes a 5% annual income growth (Census Bureau).
2. Under the Formula Amount, the borrower always pays the formula amount; i.e. payback rate times income.
3. Under the Capped Amount, the borrower never pays more than the standard 12-year amortization amount.

Loan payments are made to the U.S. Department of Education. For more information on repayment options, write for a copy of the Direct Loans Repayment Book at the following address--

Federal Student Aid Information Center
P.O. Box 84
Washington, DC 20044

FFEL Stafford Loans

The processes of applying for a loan and paying funds to the borrower, as well as the methods of repayment, differ somewhat for Direct Stafford Loans and FFEL Stafford Loans.

How do I apply for an FFEL Stafford Loan?
First, complete the 1996-97 Free Application for Federal Student Aid (FAFSA) or Renewal FAFSA. After your FAFSA is processed, your school will review the results and will inform you about your general loan eligibility.

Second, complete the Federal Stafford Loan Application and Promissory Note, available from your school, a lender, or your state guaranty agency. Remember, the promissory note is a legal document requiring you to repay the loan. Read it carefully before you sign.

Third, take your completed Federal Stafford Loan Application and Promissory Note to the school you plan to attend. After the school completes its portion of the application, you (or the school on your behalf) must send the application to a lender for evaluation.

NOTE: Your school can refuse to certify your loan application, or can certify a loan for an amount less than you would otherwise be eligible for, if the school documents the reason for its action and explains the reason to you in writing. The school's decision is final and cannot be appealed to the U.S. Department of Education.

How can I find a lender?
Contact the guaranty agency that serves your state. For your agency's address and telephone number, and for more information about borrowing, call the Federal Student Aid Information Center's toll-free number: 1-800-4-FED-AID (1-800-433- 3243).

How will I be paid?
In most cases, the lender will send the loan funds to your school in at least two payments; no payment may exceed one-half of your total loan amount. Your school can pay you directly (usually by check), credit your account, or combine these methods.

If you're a first-year undergraduate student and a first-time borrower, your first payment may not be disbursed until 30 days after the first day of your enrollment period. This way, you won't have to repay the loan if you don't begin classes, or if you officially withdraw during the first 30 days of classes.

How much will I have to repay each month?
The amount of each repayment depends on your loan amount and on the length of your repayment period. If your first FFEL Program Loan was disbursed on or after July 1, 1993, you have the option of repaying your loan using a standard, graduated or income-sensitive repayment plan, but you are required to repay the loan within 10 years.

The chart below shows estimated monthly payments and total interest charges for various 8.25 percent loans under a standard repayment plan. Remember that 8.25 percent is the highest interest rate that can be charged for loans disbursed after July 1, 1993. Your rate may be lower.

Examples of Typical Payments for Standard Repayment Plan at 8.25% Interest

PLUS Loans (Loans for Parents)

Federal PLUS Loans (PLUS Loans) enable parents with good credit histories to borrow to pay the education expenses of each child who is a dependent undergraduate student enrolled at least half time. PLUS Loans are available through both the Direct Loan and FFEL programs. Most of the benefits to parent borrowers are identical in the two programs.

Are there any borrowing requirements my parents have to meet? Yes. To be eligible to receive a PLUS Loan, your parents generally will be required to pass a credit check. If they don't pass the credit check, they might still be able to receive a loan if someone, such as a relative or friend who is able to pass the credit check, agrees to endorse the loan, promising to repay it if your parents should fail to do so. Your parents might also qualify for a loan even if they don't pass the credit check if they can demonstrate that extenuating circumstances exist. You must meet the general eligibility requirements for federal student financial aid. Your parents must also meet some of these general requirements. For example, your parents must meet citizenship requirements and may not be in default or owe a refund to any SFA program.

How much can my parents borrow?
The yearly limit on either type of PLUS Loan is equal to your cost of attendance minus any other financial aid you receive. For example, if your cost of attendance is $6,000 and you receive $4,000 in other financial aid, your parents could borrow up to--but no more than--$2,000.

What's the interest rate on PLUS Loans?
The interest rate is variable, but it will never exceed 9 percent. The interest rate is adjusted each year on July 1. Your parents will be notified of interest rate changes throughout the life of their loan(s). Interest is charged on the loan from the date the first disbursement is made until the loan is paid in full.

Is there a charge for a PLUS Loan?
Your parents will pay a fee of up to 4 percent of the loan, deducted proportionately each time a loan payment is made. For an FFEL PLUS Loan, a portion of this fee goes to the federal government to help reduce the cost of the loans. For a Direct PLUS Loan, all of this fee goes to the government. Also, if your parents don't make their loan payments when they're scheduled, they may be charged collection costs and, for FFEL PLUS Loans, late fees.

When do my parents begin repaying a PLUS Loan?
Generally, within 60 days after the final loan disbursement. There is no grace period for these loans. This means that interest begins to accumulate at the time the first disbursement is made. Your parents must begin repaying both principal and interest while you're in school.

Is it ever possible to postpone repayment of a PLUS Loan?
Yes. Under certain circumstances, your parents can receive a deferment or forbearance on their loan. The conditions for eligibility and procedures for requesting a deferment or forbearance that apply to Stafford Loans also apply to PLUS Loans. However, since all PLUS Loans are unsubsidized, your parents will be charged interest during periods of deferment or forbearance. If they do not pay the interest as it accrues, it will be capitalized.

Can a PLUS Loan be discharged (canceled)?
Yes, under certain circumstances. A discharge releases your parents from all obligation to repay the loan. A complete listing of discharge conditions is given in the Discharge/Cancellation Summary.

Your parents' loan cannot be discharged because you didn't complete your program of study at your school (unless you were unable to complete the program because the school closed), didn't like the school or the program of study, or didn't obtain employment after completing the program of study.

Repayment assistance (not a discharge of the loan, but another way to satisfy their obligation to repay), may be available to your parents for an FFEL PLUS Loan if you serve in the military. For more information, contact your recruiting officer.

For more information about loan discharge or repayment, Direct PLUS Loan borrowers should contact the Direct Loan Servicing Center; FFEL PLUS Loan borrowers should contact the lenders or agencies that hold their loans.

Direct PLUS Loans

The processes of applying for a loan and paying funds to the borrower, as well as the repayment plans offered, differ somewhat between the Direct PLUS Loan and the FFEL PLUS Loan.

How do my parents apply for a Direct PLUS Loan?
Your parents must fill out a Direct PLUS Loan Application and Promissory Note, which is available from your school's financial aid office. (It is not necessary for you or your parents to fill out a FAFSA to apply for this loan, unless your school requires it.)

NOTE: Your school can refuse to certify your parents' loan application, or can certify a loan for an amount less than they would otherwise be eligible for, if the school documents the reason for its action and explains the reason to your parents in writing. The school's decision is final and cannot be appealed to the U.S. Department of Education.

Do my parents need to find a lender?
No. Under the Direct Loan Program, their lender will be the U.S. Department of Education. Your school assists the federal government in administering the Direct Loan Program by distributing the loan application, processing the loan, and delivering the loan funds.

How will my parents be paid? In most case, the loan money will be sent to your school in at least two installments (no installment can be greater than half the loan amount). The funds will first be applied to your school account (if your school has an account for you) to pay for tuition and fees, room and board, and other school charges. If any loan money remains, your parents will receive the amount as a check or in cash, unless they authorize it to be released to you or to be put in your school account. Any remaining loan money must be used for your education expenses.

How do my parents pay back the loan?
Your parents can choose the Standard, Extended, or Graduated Repayment Plan. The Income Contingent Repayment Plan is not an option for Direct PLUS borrowers.

FFEL PLUS Loans

The processes of applying for a loan and paying funds to the borrower, as well as the repayment plans offered, differ somewhat between the FFEL PLUS Loan and the Direct PLUS Loan.

How do my parents apply for an FFEL PLUS Loan?
Your parents must submit a completed PLUS loan application (available from your school, a lender, or your state guaranty agency) to your school. After the school completes its portion of the application, it must be sent to a lender for evaluation. Because your financial need does not have to be evaluated, you do not need to file a FAFSA, unless your school requires it.

NOTE: Your school can refuse to certify your parents' loan application, or can certify a loan for an amount less than they would otherwise be eligible for, if the school documents the reason for its action and explains the reason to your parents in writing. The school's decision is final and cannot be appealed to the U.S. Department of Education.

How can my parents find a lender?
Your parents should contact the guaranty agency that serves your state. For your agency's address and telephone number, and for more information about borrowing, call the Federal Student Aid Information Center's toll-free number: 1-800-4-FED- AID (1-800-433-3243).

How will my parents be paid?
In most cases, the lender will send the loan funds to your school in at least two payments; no one payment may exceed half of the loan amount. Payments will be sent either by electronic funds transfer or by check made co-payable to your school and your parents.

How do my parents pay back the loan?
The lender will arrange a repayment schedule, providing for a minimum of $600 to be paid annually and a maximum repayment period of 10 years (excluding periods of deferment and forbearance).

Consolidation Loans

Consolidation loans allow a borrower to combine different types of federal student loans to simplify repayment. (A borrower with just one loan can also choose to consolidate it.) Both the Direct Loan Program and the FFEL Program offer consolidation loans. However, Direct Consolidation Loans and FFEL Consolidation Loans are very different and are discussed separately here.

Direct Consolidation Loans

A Direct Consolidation Loan is designed to help student and parent borrowers simplify loan repayment. Even though you might have several different federal student loans, you'll make only one payment a month for all the loans you consolidate. You can even consolidate just one loan into a Direct Consolidation Loan, to get benefits such as flexible repayment options.

What kinds of loans can be consolidated under a Direct Consolidation Loan?
Most federal student loans and PLUS Loans (including FFEL program loans) can be consolidated. All the loans discussed in the Guide are eligible for consolidation. The Direct Loan Servicing Center can give you a complete listing of eligible loans. The toll-free telephone number of the Servicing Center's Consolidation Department is 1-800-848-0982.

There are three types of Direct Consolidation Loans--

• Direct Subsidized Consolidation Loans
• Direct Unsubsidized Consolidation Loans
• Direct PLUS Consolidation Loans

What is the interest rate on a Direct Consolidation Loan?
For Direct Subsidized and Unsubsidized Consolidation Loans, the interest rate is variable but cannot exceed 8.25 percent. For Direct PLUS Consolidation Loans, the interest rate is also variable and may not exceed 9 percent. These interest rates are adjusted each year on July 1.

What are the benefits of a Direct Consolidation Loan?
If you have more than one loan, a Direct Consolidation Loan simplifies the repayment process, because you make only one payment a month. Also, the interest rate on the Direct Consolidation Loan may be lower than what you're currently paying on one or more of your loans.

Another advantage of a Direct Consolidation Loan is that you may gain additional deferment possibilities. An FFEL borrower who consolidates using a Direct Consolidation Loan is eligible for all the deferments available to Direct Loan borrowers, in addition to all the deferments the borrower was eligible for under the FFEL Program.

If you're in default on a federal student loan, you may receive a Direct Consolidation Loan provided you agree to repay the defaulted loan under the Income Contingent Repayment Plan or make satisfactory repayment arrangements (that is, three voluntary, on-time, full monthly payments).

A Direct Consolidation Loan gives the borrower expanded repayment options, because all the Direct Loan repayment plans are available to borrowers of Direct Consolidation Loans. However, Direct PLUS Consolidation Loans are not eligible to be repaid under the Income Contingent Repayment Plan. Also, if you consolidate one loan, you cannot select the Standard Repayment Plan.

How can I get a Direct Consolidation Loan?
You can get a Direct Consolidation Loan during your grace period, once you have entered repayment, or, in some cases, while you're still enrolled in school. You'll be given more information about consolidation loans during entrance and exit counseling sessions at your school. You may also contact the Servicing Center's Consolidation Department at 1-800-848-0982 for an application or more information.

FFEL Consolidation Loans

An FFEL Consolidation Loan is designed to help student and parent borrowers consolidate several types of federal student loans with various repayment schedules into one loan. With an FFEL Consolidation Loan, you'll make only one payment a month. FFEL Consolidation Loans are available from participating lenders, such as banks, credit unions, and savings and loan associations.

What kinds of loans can be consolidated under an FFEL Consolidation Loan? Most federal student loans and FFEL PLUS Loans can be consolidated. Most of the loans discussed in the Guide are eligible for consolidation; Direct Loans may not be consolidated under an FFEL Consolidation Loan. A participating lender can give you a complete listing of eligible loans.

There are two types of FFEL Consolidation Loans--subsidized and unsubsidized. If all of the loans you consolidate are subsidized, you'll receive a subsidized FFEL Consolidation Loan. If any loan you consolidate is unsubsidized, you'll receive an unsubsidized FFEL Consolidation Loan.

What's the interest rate on an FFEL Consolidation Loan? The interest rate for your FFEL Consolidation Loan will be the weighted average of the original interest rates of the loans being consolidated rounded up to the nearest whole percent.

How can I get an FFEL Consolidation Loan?
You can consolidate any loans that have entered repayment or that are in a grace period. If any loan you want to consolidate is in default, you must make satisfactory repayment arrangements on that loan before it can be included in the consolidation (that is, three voluntary, on-time, full monthly payments).

You'll be given more information about consolidation during entrance and exit counseling sessions at your school. You may also contact the consolidation department of a participating lender for an application or more information.

Campus-Based Programs

The three programs discussed in this section are called campus-based programs because they're administered directly by the financial aid office at each participating school. Not all schools participate in all three programs. The Federal Supplemental Educational Opportunity Grant (FSEOG) Program awards grants, the Federal Work-Study (FWS) Program offers jobs, and the Federal Perkins Loan Program offers loans. Even though each program is different, they have these characteristics in common:

• How much aid you receive depends on your financial need, on the amount of other aid you'll receive, and on the availability of funds at your school. Unlike the Federal Pell Grant Program, which provides funds to every eligible student, each school participating in any of the campus-based programs receives a certain amount of funds for each campus-based program each year. When that money is gone, no more awards can be made from that program for that year.
  
  
• Each school sets its own deadlines for students to apply for campus-based funds. The deadlines will usually be earlier than the U.S. Department of Education's deadline for filing a federal student financial aid application (in this case, June 30, 1997). Ask your FAA about the school's deadlines. You may miss out on aid from these programs if you don't apply early!

Federal Supplemental Educational Opportunity Grants

What is a Federal Supplemental Educational Opportunity Grant? A Federal Supplemental Educational Opportunity Grant (FSEOG) is for undergraduates with exceptional financial need, that is, students with the lowest Expected Family Contributions (EFCs), and gives priority to students who receive Federal Pell Grants. An FSEOG doesn't have to be paid back.

What's the difference between an FSEOG and a Federal Pell Grant? The U.S. Department of Education guarantees that each participating school will receive enough money to pay the Federal Pell Grants of its eligible students. There's no guarantee every eligible student will be able to receive a FSEOG; students at each school are paid based on the availability of funds.

How much can I get?
You can get between $100 and $4,000 a year, depending on when you apply, your level of need, and the funding level of the school you're attending.

How will I be paid?
Your school will credit your account, pay you directly (usually by check), or combine these methods. Schools must pay students at least once per term (semester, trimester, or quarter). Generally, schools that do not use traditional terms must pay you at least twice during the academic year.

Federal Work-Study

What is Federal Work-Study?
The Federal Work-Study (FWS) Program provides jobs for undergraduate and graduate students with financial need, allowing them to earn money to help pay education expenses. The program encourages community service work and work related to your course of study.

How much can I make?
Your FWS salary will be at least the current federal minimum wage, but it may be higher, depending on the type of work you do and the skills required. Your total FWS award depends on when you apply, your level of need, and the funding level of your school.

How will I be paid?
If you're an undergraduate, you'll be paid by the hour. If you're a graduate student, you may be paid by the hour or you may receive a salary. No FWS student may be paid by commission or fee. Your school must pay you directly at least once a month.

Are Federal Work-Study jobs on campus or off campus?
Both. If you work on campus, you'll usually work for your school. If you work off campus, your employer will usually be a private nonprofit organization or a public agency, and the work performed must be in the public interest. Some schools may have agreements with private for-profit employers for FWS jobs, which must be relevant to your course of study. If you attend a proprietary school, there may be further restrictions on the jobs you can be assigned.

Can I work as many hours as I want?
No, the amount you earn can't exceed your total FWS award. When assigning work hours, your employer or FAA will consider your class schedule and your academic progress.

Federal Perkins Loans

What is a Federal Perkins Loan?
A Federal Perkins Loan is a low-interest (5 percent) loan for both undergraduate and graduate students with exceptional financial need. Your school is your lender and the loan is made with government funds. You must repay this loan to your school.

How much can I borrow?
Depending on when you apply, your level of need, and the funding level of the school, you can borrow up to--

• $3,000 for each year of undergraduate study. The total amount you can borrow as an undergraduate is $15,000.
  
  
• $5,000 for each year of graduate or professional study. The total amount you can borrow as a graduate/professional student is $30,000. (This includes any Federal Perkins Loans you borrowed as an undergraduate.)

Is there a charge for this loan?
A Perkins Loan borrower is not charged an origination fee or an insurance premium. However, if you skip a payment, make a payment late, or make less than a full payment, you may have to pay a late charge plus any collection costs. Late charges will continue until your payments are current.

How will I be paid?
Your school will either pay you directly (usually by check) or credit your account. Generally, you'll receive the loan in at least two payments during the academic year.

When do I pay back this loan?
If you're attending school at least half time, you have nine months after you graduate, leave school, or drop below half-time status before you must begin repayment. This is called a grace period. If you're attending less than half time, check with your FAA to determine your grace period. At the end of your grace period, you must begin repaying your loan. You may be allowed up to 10 years to repay.

How much will I have to repay each month?
Your monthly payment amount will depend on the size of your debt and the length of your repayment period.

The chart below shows typical monthly payments and total interest charges for three different 5-percent loans over a 10-year period.

Examples of Typical Payments for Perkins Loan Repayment

Can I postpone repayment of my Federal Perkins Loan?
Yes. Under certain circumstances, you can receive a deferment or forbearance on your loan. During a deferment, you are allowed to temporarily postpone payments on your loan, and no interest accrues. You may receive a deferment under certain conditions, such as unemployment. See the Loan Deferment Summary for the list of deferments available if your Perkins Loan was disbursed on or after July 1, 1993. If you have a loan that was disbursed before July 1, 1993, check your promissory note for the deferments that apply to that loan.

Deferments are not automatic. You must apply for one through your school, using a deferment request form your school can give you. You must file your deferment request on time or you'll pay a late charge. For more detail on deferments, contact your financial aid office.

If you are temporarily unable to meet your repayment schedule, but are not eligible for a deferment, you may receive forbearance for a limited and specific period. During forbearance, your payments are postponed or reduced. Interest continues to accrue; you are responsible for it.

Forbearance isn't automatic either. You may be granted forbearance in up to 12- month intervals for up to three years. You must apply for forbearance in writing through the school that made your loan or the agency the school employs to service your loan. You'll have to provide documentation to support your request for forbearance. You must continue making scheduled payments until you are notified that deferment or forbearance has been granted.

Can my Federal Perkins Loan be canceled?
Yes. If the borrower dies or becomes totally and permanently disabled, the loan can be canceled. A loan may also qualify for cancellation under certain other conditions--as long as the borrower is not in default. See the Discharge/Cancellation Summary for the list of cancellation conditions. For more information, contact your financial aid office.

Although not a cancellation, if you serve as an enlisted person in certain specialties of the U.S. Army, the Army Reserves, the Army National Guard, or the Air National Guard, the U.S. Department of Defense may, as an enlistment incentive, repay a portion of your Federal Perkins Loan. If you think you qualify, contact your recruiting officer.

If you have any questions about the terms of your Federal Perkins Loan, repayment obligations, deferment, forbearance, or cancellation, check with the school that made the loan. Only that school can grant deferment, forbearance, or cancellation, or make other decisions concerning your loan.