Loans for Students and Parents
Loans are borrowed funds that have to be repaid with interest. Loans are available for both students and parents. The lender for all federal loans (student and parent loans) is the U. S. Department of Education. The lender for an alternative/private loan borrower (student or parent) is a private lender or bank of your choosing. Many student and parent loans allow deferment, or postponement, of payments until after graduation. To find out more about specific loan programs, choose a type of loan from the selections below:
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.
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.
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|
|Undergraduate Dependent*||$ 23,000||$31,000|
*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 2015-2016:
- 4.66% Fixed Rate for Subsidized/Unsubsidized Loans
1.073% Fee Assessed to Student
All student loans (both subsidized and unsubsidized) have a 1.073% origination fee. This reduces the amount that disburses to the student account in the SMC Business Office. For example, if you borrow $3,500, you will view and accept this amount on your SMC Award Letter. Because of the 1.073% origination fee, only $3,464 will actually be disbursed to your account and be seen on your SMC Billing Statement.
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.
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 obtain necessary from you loan servicer. If you are not sure who your loan servicer is, you can inquire at www.nslds.ed.gov .
Need further information regarding Federal Direct Student Loans? Visit http://studentaid.ed.gov/types/loans
Federal Direct PLUS (Parent Loan for Undergraduate Students)
Parents of dependent undergraduate students may apply for assistance through the Federal Direct PLUS Loan Program for Parents. Parents may borrow funds under the PLUS Program to assist in paying for college expenses incurred by their undergraduate students. Students must be enrolled at least half-time (6 credit hours per term) and maintain satisfactory academic progress. Eligibility for a PLUS is based on a parent’s creditworthiness and not on financial need.
Repayment of PLUS funds begins 60 days following the final disbursement of the loan each year. However, parent borrowers can contact the loan servicer to request a deferment while the parent/student is enrolled at least half-time and for an additional six months after the student ceases to be enrolled at least half-time. If the loan is deferred, interest will accrue on the loan during the deferment. Parents may choose to pay the accrued interest or allow the interest to capitalize when the deferment ends.
- Sign in to www.studentloans.gov using your Personal Identification Number (PIN) used when completing the FAFSA. To initiate the PLUS loan process, you must choose “Complete PLUS Request Process” on the left side of the screen.Credit Check: After completing the online application a credit check will be processed on the parent applicant. If the applicant is ninety days delinquent on any account, has declared bankruptcy, or has had a financial judgment, the PLUS loan will be denied. The Direct Loan Origination and Applicant Services (LOAS) will notify the applicant and identify the name & phone number of the agency that reported the adverse credit status. If the credit data is inaccurate, the loan denial decision may be appealed by contacting LOAS. Please note that the SMC Office of Financial Aid is not provided any information about the reason for the denial. All loan denial appeals are handled by LOAS. LOAS may be contacted at (800) 557-7394.
If the decision was based on accurate information, the applicant may exercise the option to obtain an endorser (similar to a co-signer) on the loan. The LOAS will include an endorser promissory note with the denial letter. The endorser can be the other parent or anyone who meets the above credit criteria and is willing to endorse the PLUS loan. The student may not endorse the parent’s loan. The endorser note should be returned to LOAS.
Undergraduate students whose parents are unable to borrow PLUS funds may have the option to increase their Unsubsidized Loan amounts. Please discuss increasing a student loan in detail with an SMC Financial Aid Counselor.
- Once the loan application has been approved, parents must complete the Master Promissory Note for a Parent PLUS online at www.studentloans.gov
- All parent loan borrowers must notify the SMC Office of Financial Aid of your specific interest in borrowing a PLUS loan by completing the SMC Parent Loan Request Form. Please complete the form in ink and mail or fax to our office. This is a federal requirement and we cannot finalize any PLUS loan without this documentation on file in our office. This form must be completed each academic year.
- If a PLUS loan is approved by documenting extenuating circumstances or obtaining an endorser, the parent must complete counseling at https://studentloans.gov
- Once Steps 1-4 have been successfully completed, we will add the PLUS loan to your student’s SMC Award Letter. Loans can be accepted by the student via the SMC Student Portal or with a paper award letter.
Interest and Fees
Federal PLUS interest rates for 2015-2016:
- 7.21% Fixed Rate for all PLUS borrowers
4.292% Fee Assessed to Parent
All PLUS loans have a 4.292% origination fee. This fee reduces the amount that disburses to the student’s account in the SMC Business Office. For example, if you borrow $10,000, the student will view and accept this amount in his/her award letter. Because of the 4.292% origination fee, only $9,571 will actually be disbursed to the student’s account and be seen on the SMC Billing Statement.
Need further information regarding Federal Direct Parent Loans? Visit www.direct.ed.gov
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 process and helpful Q&A, you may also want to review the Student Lending Analytics website.
- Collect all the information that you need prior to starting the application process. Most lender applications require information on the borrower (the parent or the student), a co-borrower (also referred to as a co-signer) and several references.
- Identify a co-borrower (also called a co-signer) that will strengthen your application. A co-borrower guarantees the loan taken out by the parent/student borrower. A co-borrower can be 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.
- 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.
- 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 at 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:
- FinAid’s Loan Discount Analyzer, a website used to generate an apples-to-apples comparison of different loan programs
- And the Private Student Loan Comparison Chart, a website that provides a basic comparison chart that highlights the key characteristics of the major private education loans.
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 parents (or students) 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:
- Choose your lender and apply for the alternative loan of your choice.
- Complete all paperwork (MPN, Self-Certification Form, etc.) with the lender of your choosing.
- 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.
- Your student should verify and “accept” the Alternative Loan listed in his/her SMC Award Letter via the SMC Student Portal or with a paper award letter.