Student Loans


Federal Direct Student Loans

The Federal Direct Student Loan is a low-interest student loan available from the U. S. Department of Education through the William D. Ford Federal Direct Loan Program. Students borrowing from the Direct Loan Program must be degree-seeking, enrolled at least part-time (6 credit hours per term) and maintain satisfactory academic progress. Repayment begins 6 months after the student is no longer enrolled at any institution with a status of part-time or greater. Direct student loans are categorized into two versions, subsidized or unsubsidized.

A subsidized loan is based on a student's financial need as determined by the Free Application for Federal Student Aid (FAFSA) and the other financial aid (grants and scholarships) awarded. If you qualify for this version, the federal government pays the interest on your loan while you are enrolled at least half-time or during grace and deferment periods.

An unsubsidized loan is not based on financial need. This loan will accrue interest while a student is enrolled in school (and other periods of non-repayment) from the time the loan is disbursed. It is recommended that you choose to make interest-only payments while enrolled in school. However, you may defer payments on the interest until you cease enrollment, but the interest will be capitalized. In other words, the interest will be added to the original principal and at a higher rate.

Application Process

1. Complete the Free Application for Federal Student Aid (FAFSA)
2. "Accept" the offered loan on your SMC Award Letter via the SMC Student Portal or with a paper award letter. If you would like to decrease the amount of the student loan offered in your SMC Award Letter, please contact the SMC Office of Financial Aid in writing and include your signature on the request.
3. Complete required Entrance Counseling at www.studentloans.gov.
4. Complete a Federal Direct Loan Master Promissory Note (MPN) at www.studentloans.gov.

Loan Limits

The maximum amount you can borrow each academic year depends on your classified grade level at your institution and your dependency status. See the chart below for annual and lifetime borrowing limits. The amounts below are maximum values. You may not be eligible for the maximum annual amounts due to other financial aid that you receive. The annual amount refers to the maximum that a student may borrow during one academic year. The aggregate amount refers to the maximum a student can borrow in a lifetime. An annual subsidized loan amount cannot exceed the base amount.

Grade Level

Annual Loan Limits

Aggregate Loan Limits

Base

Amount

Additional Unsubsidized

Subsidized

Limit

Overall

Limit

Undergraduate Dependent*

$ 23,000

$31,000

Freshman Year

$3,500

$2,000

Sophomore Year

$4,500

$2,000

Undergraduate Independent

$23,000

$57,500

Freshman Year

$3,500

$6,000

Sophomore Year

$4,500

$6,000

 

*Undergraduate Dependent students whose parents are unable to borrow a PLUS loan are eligible for the Undergraduate Independent loan limits.

Interest and Fees

Federal Direct Student Loan interest rates for 2010-2011:

  • 4.5% Fixed Rate for Subsidized Loans (Undergraduates)
  • 6.8% Fixed Rate for Unsubsidized Loans (All Borrowers)

0.5% Fee Assessed to Student

Loan Type

Gross Fee

Minus Rebate*

Equals Net Fee Charged for 2010-11

Federal Direct Student Loan

1.0%

0.5%

0.5%

All student loans (both subsidized and unsubsidized) have a 1.0% origination fee. Students receive a 0.5% rebate at the time of origination based on paying their first 12 monthly payments on time. Therefore the assessed fee is only 0.5%. This fee reduces the amount that disburses to a student's account in the SMC Business Office. For example, if you borrow $2,000, you will view and accept this amount on your SMC Award Letter. Because of the 0.5% origination fee, only $1,990 will actually be disbursed to your student account and be seen on your SMC Billing Statement.

*Failure to make your first 12 monthly payments on time will result in the rebate amount being added to your principal balance.

Entrance Counseling

The federal government requires all first-time student loan borrowers to participate in loan counseling prior to receiving a Federal Direct Loan. Entrance Counseling will explain various aspects of student loans, such as repayment and interest. Students should allow approximately 20-30 minutes to complete the online Entrance Counseling, which includes a quiz.

Online Entrance Counseling can be completed at www.studentloans.gov. Students will sign in to the website using their Personal Identification Numbers (PINs) used when completing the FAFSA. If you have lost or forgotten your PIN, you may request a duplicate or new PIN online at www.pin.ed.gov.

After the student completes the Entrance Counseling, the results will be sent electronically to Spartanburg Methodist College.

Failure to complete this required counseling will result in a delay in processing your loan funds. Any delay may cause an outstanding balance due in the SMC Business Office at the end of the term for which the student is responsible.

Direct Loan Master Promissory Note

All students who have not borrowed from Direct Loans before must complete a Federal Direct Loan Master Promissory Note online at www.studentloans.gov before loan funds can be disbursed to the student's account in the SMC Business Office.

Students will need their Personal Identification Numbers (PINs) in order to sign in to the website and complete the online MPN. If you have lost or forgotten your PIN, you may request a duplicate or new PIN online at www.pin.ed.gov.

Spartanburg Methodist College will receive electronic confirmation from the U. S. Department of Education of all completed MPNs.

Exit Counseling

The federal government requires that all students participate in loan counseling prior to leaving or graduating from the school at which they received a Federal Direct Loan. To complete Exit Counseling, visit www.studentloans.gov. You will need your Personal Identification Number (PIN) in order to sign in to the site and complete the Exit Counseling.

During Exit Counseling, you will learn about additional deferment and forbearance and how to get the necessary forms. Even though you have a six-month grace period, the Exit Counseling will assist you in setting up a repayment plan, a direct withdrawal and a payment date. The Direct Loan Servicer, who handles all Direct Loan repayments, hosts Exit Counseling. Visit them at www.dl.ed.gov or call them at 1-800-848-0979.

Need further information regarding Federal Direct Student Loans? Visit www.dl.ed.gov


Perkins Student Loan

Perkins Loans are need-based loans that use a combination of institutional and federal funds. Perkins Loans are awarded at the discretion of the SMC Office of Financial Aid. Funds are limited and recipients are those with the highest financial need as calculated by the Free Application for Federal Student Aid (FAFSA). Students borrowing from the Perkins Loan Program must be degree-seeking, enrolled at least part-time (6 credit hours per term) and maintain satisfactory academic progress. Repayment of a Perkins Loan begins 9 months after a student drops below half-time status.

Application Process

1. Complete the Free Application for Federal Student Aid (FAFSA)
2. "Accept" the offered loan on your SMC Award Letter via the SMC Student Portal or with a paper award letter. If you would like to decrease the amount of the student loan offered in your SMC Award Letter, please contact the SMC Office of Financial Aid in writing and include your signature on the request.
3. Directions to complete the process will be mailed to you under separate cover by the SMC Office of Financial Aid.

Loan Limits

The current maximum Perkins Loan that a student can borrow is $5500 per year.

Interest and Fees

Perkins loans have no origination fee and a fixed interest rate of 5% that is deferred until repayment.

Alternative/Private (Non-Federal) Loans

An alternative (also called private) loan is a loan through a commercial lender. Only look for alternative loans after you have exhausted all potential scholarships, federal grants, work-study funds, and federal loan programs via the FAFSA process.

While alternative loans might be the difference between attending college or not, alternative loans generally have higher interest rates than federal loan programs and eligibility is based on your creditworthiness, not financial need. We have highlighted some key steps in the alternative loan application process below, but for a thorough explanation of the application process and helpful Q&A, you may also want to take a look at the publication SLA Guide to Alternative Loans.

  1. Collect all the information that you need prior to starting the application process. Most lender applications require information on the borrower (the student or the parent), a co-borrower (also referred to as a co-signer) and several references,
  2. Identify a co-borrower (also called a co-signer) that will strengthen your application. A co-borrower guarantees the loan taken out by the student/parent borrower. A co-borrower can be a parent, a grandparent, a relative or any individual willing to take on that responsibility. You will want to ensure that they have good credit, as their credit status will play a significant role in the pricing of your loan. Given the current "credit crunch", having a creditworthy co-borrower can be critical to getting your loan approved.
  3. Plan on applying for up to 2 - 4 loans. Research indicates that applying for too many loans can have a negative impact on your credit score. The tradeoff is that by not applying for more than one loan you may be missing an opportunity to save on your loan. Recent research on just three lenders found interest rates ranged from 9.0% to 12.4% while fees ranged from 0% to 9% for a good credit borrower.
    It pays to compare! Because private loan providers offer variable rates and special incentives, do your homework and find the lender that best suites your needs. And be wary of comparing loans with different repayment terms according to APR, as a longer loan term reduces the APR despite increasing the total amount of interest paid.
  4. Understanding the interest rate index tied to the loan (i.e., what is LIBOR & Prime?) Interest rates on alternative loans are typically priced off an index, such as the Prime Rate or LIBOR index (one or three month LIBOR are common). The loan is then priced as a margin over that index (e.g., 1 month LIBOR + 6%). The current rates on these indices may be found @ Bankrate.com.

    Please note that lenders update their indices on a regular basis (typically monthly or quarterly) so the rates listed above may not match the actual rates charged by lenders. Ask the lender what its Current Index is which will answer this question.

Other resourceful websites that may assist you in obtaining an alternative loan include:

Effective February 14, 2010 institutions are required to provide the Private Education Loan Applicant Self-Certification Form to alternative loan applicants, upon the applicant's request. Note the self-certification form must be submitted to your lender, and most lenders will provide you this form during your application process. Forms should NOT be sent to Spartanburg Methodist College. It must be completed by the borrower and sent to the lender that you are applying with. If you need a copy of the Self-Certification form, you may download it here. While we cannot fill out this form for you, we can give you some of the information needed to complete the form.

Alternative Loan Lenders

While students (or parents) may borrow an alternative loan from any lender of their choosing, we have compiled a list of lenders that Spartanburg Methodist College students commonly use. The list of lenders Spartanburg Methodist College students commonly use is alphabetical and provides lender links. You should review each website and decide which lender is best for you. You can borrow from one of these lenders or select one on your own. If you are borrowing from a lender not on this list, please contact the SMC Office of Financial Aid so that we can expedite the loan approval process.

Over the past five years, our largest private loan lenders by volume have been:

Sallie Mae - Smart Option Student Loan www.salliemae.com

SC Student Loan Corporation - Palmetto Assistance Loan (PAL) www.scstudentloan.org

Wells Fargo - Wells Fargo Education Connection Loan www.wellsfargo.com

Application Process

1. Choose your lender and apply for the alternative loan of your choice.
2. Complete all paperwork (MPN, Self-Certification Form, etc.) with the lender of your choosing.
3. If your lender does not provide you with a Self-Certification Form to complete, you may print a copy from our website. A private loan will not be disbursed until the Self-Certification Form is complete and on file with your lender.
4. Verify and "accept" the Alternative Loan listed in your SMC Award Letter via the SMC Student Portal or with a paper award letter.