2008-09 POLICIES HANDBOOK - Colorado College

Loans

New for 2008-09

Beginning in the 2008-09 school year Colorado College provides loans to all 1st year students and returning students who are new borrowers through the William D. Ford Federal Direct Loan Program, one of the Federal Student Aid programs of the U.S. Department of Education. Returning students and parents who have borrowed previously should continue to borrow through their existing lender under the Federal Family Education Loan Stafford or PLUS loan program (FFEL).

We discuss the two main student loan programs in this section: the Federal Stafford loan program (Direct or FFEL) and the Federal Perkins Loan program. We encourage students to borrow only what is necessary. Our affordability plan is designed to maintain student borrowing at levels manageable after graduation. The Federal Stafford and Perkins Loan limits are shown below. We also include information about the Federal PLUS Loan for parents, as well as alternative student loans and other financing options for parents. The federal Stafford and PLUS loan programs require a student to be enrolled at least half time.

Federal Stafford Loan (Subsidized and Unsubsidized)

Direct Loan Program for first time borrowers and Federal Family Education Loan Program for existing borrowers

Federal Direct Loans -click here for information.

Limits:  Annual Stafford loan limits are  $3,500 for a freshman, $4,500 for a sophomo re and $5,500 for a junior or senior.  Interest on these loans may be subsidized by the government based on the cost of education, the family contribution and other aid received. Because of recent federal legislation , students may borrow an additional $2,000 Unsubsidized Stafford in addition to the annual limits to total $5,500 for a freshman, $6,500 for a sophomore and $7,500 for a junior or senior.

If a Federal Stafford Loan (Direct or FFEL) is included in the affordability plan, it is a subsidized loan amount unless it specifically states that it is unsubsidized. The federal government pays the interest on the subsidized loan while the student is in college at least half time and for six months after graduation. The repayment period is ten years. A minimum monthly payment of $50 is required. However, the actual amount of the payment is dependent on the total debt. Loan fees apply and will be deducted from the loan disbursement amount.

The unsubsidized Federal Stafford Loan (Direct or FFEL) is available for those who do not qualify for a subsidized loan. The interest on the unsubsidized Federal Stafford Loan begins to accrue immediately. Students can make the interest payments monthly or quarterly, or choose to have the interest deferred and added to the principal of the loan, which is called capitalization. If the student chooses to defer interest payments until after college, they will be capitalized, and interest is paid on the interest when it is added to the loan. Otherwise, the repayment requirements are the same as a subsidized Stafford Loan.

A student may be eligible for an unsubsidized portion of Stafford Loan beyond the subsidized portion up to the yearly maximum. The student may be eligible to borrow an additional unsubsidized Stafford Loan upon confirmation that the parent is ineligible to borrow a PLUS loan (see Parent Loans below).

Interest Rate. The interest rate on a Federal Subsidized Stafford Loan (Direct or FFEL) is a fixed rate of 6.0 percent and the interest rate on a Federal Unsubsidized Stafford Loan is a fixed rate of 6.8%.

Eligibility. The amount a student can borrow is limited to the difference between the cost of attendance and the sum of the expected federal contribution and any other financial aid received. For those without subsidized eligibility, the unsubsidized eligibility is the difference in the cost of attendance and any financial aid received. The Federal Stafford Loan shown in the affordability plan is the amount we recommend that the student borrow under this program.

Applying for the Federal Stafford Loan

For entering students or other first-time borrowers, the financial aid office will initiate processing the loan through the Federal Direct Stafford loan program when the student returns the signed award letter accepting the loan as part of the aid award. Click here for more information on the application process.

Students who have already borrowed a Stafford Loan. We will send a CC affordability plan or award letter that indicates the lender the student used in the past. Unless the student indicates otherwise, we will process the Stafford Loan award amount with the same lender used for previous Stafford Loans.

Master Promissory Note (MPN). Under federal regulations, students must originate their Federal Stafford Loan (Direct or FFEL) by signing a Master Promissory Note. The Master Promissory Note enables the student to sign only one promissory note for all Stafford Loans while at Colorado College. Click here for more information about filling out the Master Promissory Note .

Disbursement of Loan Funds. In most cases the loan proceeds will be payable in two installments. The second payment usually occurs at the beginning of the second semester for full academic-year loans. For students to determine the actual amount of funds they will receive from the Stafford Loan (Direct or FFEL), it is necessary to subtract the loan origination fees from the amount borrowed. Average loan fees are added to the overall cost of attendance when applying for the loan. However, it is institutional policy that loan fees are not funded with CC grant or scholarship dollars.

Funds will be disbursed electronically (EFT = electronic funds transfer). EFT loan funds will be deposited directly to the student's account.

In compliance with federal requirements, students who are borrowing for the first time at Colorado College must also complete a pre-loan counseling session before the funds can be credited to their account. Students fulfill this requirement with an on-line Stafford Direct Loan Entrance Counseling Session available at http://www.coloradocollege.edu/financialaid/Loans/

Deferments, Discharges, Cancellations. Periods during which payment of principal on a Federal Stafford Loan (Direct or FFEL) is postponed are called deferments. Deferments include periods of at least half-time enrollment in a degree-seeking program, study on an eligible graduate fellowship, and approved rehabilitation training programs for disabled individuals. Limited loan forgiveness is available for full-time teachers in designated schools, and others. Additional information on these topics is available in “The Student Guide” to federal financial aid at http://studentaid.ed.gov/students/publications/student_guide/index.html.

Federal Stafford Loan Limits for Independent Students and for Dependent Students Whose Parents are Ineligible to Borrow a PLUS Loan. Students who are considered independent from parental support by federal regulations, and students whose parents are ineligible to borrow a Federal PLUS loan (see PLUS Loan section) may be eligible to borrow up to the maximum loan limits defined below.

$7,500 is the first-year limit: $3,500 inital limit and up to $4,000 in additional unsubsidized loan

$8,500 is the second-year limit: $4,500 inital limit and up to $4,000 in additional unsubsidized loan

$10,500 is the annual limit for third and four year students: $5,500 limit per year for subsequent undergraduate study and up to $5,000 in additional unsubsidized loan

Federal Perkins Loan

Statutory Limits: $4,000 per year as undergraduate

$20,000 cumulative undergraduate maximum fixed interest rate of five percent

The federal government pays the interest while the student is enrolled at least half time and for nine months after graduation. The repayment of this loan is up to 10 years with a minimum monthly payment of $40 required.

Eligibility. Colorado College awards Perkins Loans to students directly so there is no separate application. Students simply accept the Perkins Loan on the award letter and return it to the financial aid office. The college receives very limited federal allocations for this loan program.

Disbursement. Federal Perkins Loans will be credited to the student account after the student has signed a Master Promissory Note. Students will receive information that encourages them to sign the MPN electronically. As with the Federal Stafford Loan, first-time recipients must complete a pre-loan counseling session before the loan can be credited to their accounts. Students fulfill this requirement with an on-line Perkins Loan Entrance Counseling Session available at http://www.ColoradoCollege.edu/FinancialAid/.

Deferments, Discharges, Cancellations. Deferments are available for periods of at least half-time enrollment in a degree-seeking program, study on an approved graduate fellowship, and approved rehabilitation training programs for disabled individuals. Significant loan forgiveness provisions are available for teachers, child or family service workers, law enforcement or corrections officers, Peace Corps volunteers, and others. Additional information on these topics is available in “The Student Guide” to federal financial aid at http://studentaid.ed.gov/students/publications/student_guide/index.html.

Parent Loans, Alternative Financing, Payment Plans

Parents and students may need to consider some of the following alternatives to assist in paying for costs at Colorado College . Students and their parents often combine options to finance college costs. The following are some resources that may be of interest.

Federal PLUS Loan –Direct Loan for new borrowers or with existing lender for prior borrowers.

In order to comply with federal loan eligibility requirements, we require students to file the FAFSA form even if they are interested only in the PLUS loan (Direct or FFEL). This federal loan is available to help parents of dependent students obtain additional funds to help finance educational costs. Many parents use this loan to finance their calculated Expected Parent Contribution. The current loan fee is up to four percent and will be deducted from the loan disbursement.

Limit: The parent and student should consider utilizing the student's full eligibility for the subsidized and unsubsidized Federal Stafford Loan (Direct or FFEL). Recent federal legislation has increased annual loan limits for dependent students by $2,000 for an additional Federal Unsubsidized Stafford Loan. As a result, a student may want to apply for the full total amount of $5,500 for a freshman, $6,500 for a sophomore and $7,500 for a junior or senior before calculating the amount to borrow in a Federal PLUS Loan. The interest rate for the additional Unsubsidized Stafford Loan is 6.8% compared to 7.9% for the Federal Direct PLUS Loan and 8.5% for a Federal PLUS Loan with a lender.

Interest Rate. The interest rate on a Federal Direct PLUS Loan is a fixed rate of 7.9 percent and a fixed rate of 8.5 percent with Federal PLUS loans outside of the Federal Direct loan program.

Repayment. Repayment begins within 60 days of funds being disbursed with a 10-year repayment period. There is a minimum monthly payment of $50; however, the level of debt incurred will determine the actual monthly payment and repayment period. Recently updated federal legislation now includes a Grace Period for Parent Federal Direct PLUS Loans or Federal PLUS Loans with a private lender. Parent PLUS Loan borrowers may request delayed repayment of their loan until six months after the dependent student for whom they borrowed ceases at least half-time enrollment. For more information about the delayed repayment of the Federal Direct PLUS Loan, the borrower can contact Borrower Services at the Direct Loan Servicing Center at 1-800-848-0979. Contact the lender for more information if the Federal PLUS Loan is with a private lender.    

Eligibility. A parent with an adverse credit history, according to criteria established by federal regulations, will be unable to borrow on behalf of the student. Upon confirmation from the lender that the parent is ineligible to borrow the PLUS Loan, the student may be eligible to receive an additional unsubsidized Stafford Loan (see loan limits under earlier section). Students must be enrolled at least half time.

Disbursement. The loan usually will be disbursed in two equal payments in an enrollment period. For the regular academic year, half would be disbursed in the fall and the other half in the spring. Electronic Fund Transfer (EFT) disbursements are credited automatically to the student's account. If the PLUS Loan on the account exceeds the total amount of charges and creates a credit balance, we are required to release the credit balance to the parent unless we receive written notification from the parent to do otherwise. PLUS Loan disbursements by some lenders are made with a paper check co-payable to the college and the parent borrower.

How to apply: First time PLUS borrowers will borrow using the William D. Ford Federal Direct Loan program. Application steps are available here.

Existing PLUS borrowers should continue borrowing with the same lender they have used in the past. Contact the Financial Aid Office staff for more information.