Direct Loans

Federal Direct Loans are made to students and guaranteed by the U.S. government to further assist needy students. A federal direct loan is money students borrow from the government that have to pay back with interest. Students are encouraged to apply for grants and scholarships before taking out a student loan, because it is a serious and long-term obligation.

 

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Student Eligibility


Eligibility

Students must be enrolled on at least a half-time basis.

All students must demonstrate need in order to receive a subsidized Federal Direct Loan. Need is determined by standard student expense budget less student financial assistance and the Expected Family Contribution (EFC).

Borrowers must meet Satisfactory Academic standards at the time of certification.

Students who have defaulted on a loan and resolve the defaulted loan may receive a Direct Loan for the academic year in which the default was resolved This is different from eligibility for Pell and campus based aid that only allows payment for the period in which the student regained eligibility.

All students must complete Entrance and Exit Loan Counseling, as well as sign a Master Promissory Note (MPN) annually.

Students who appear to have their financial need met who are also receiving need- based aid (i.e. SEOG, Cal Grant, College Work-study, etc.) may be encouraged to go through additional loan counseling

 

Summer Term

Loans are available during the summer term. If a student received loans for both the fall and spring terms, they may not receive a summer loan. However, if the students only received a loan for with the fall or spring term, then they may receive a summer term.

 

 

 

Types of Loans

 

Types of Loans - Subsidized

Subsidized loans provide low interest rates and are available to students who demonstrate financial need as determined by the information provided on the Free Application for Federal Student Aid (FAFSA).  The Federal government pays the accruing interest on the loan while the student is attending school at least half time or during deferment.


Time Limitation on Direct Subsidized Loans

For first time borrowers on or after July 01, 2013, there is a limit on the maximum period of time (measured in academic years) that you can receive Direct Subsidized Loans. In general, you may not receive Direct Subsidized Loans for more than 150% of the published length of your program. This is called a student’s “maximum eligibility period”. Students can find the published length of any program of study in the Grossmont College catalog.

 

For example, if students are enrolled in a 2-year associate degree program, the maximum period for which they can receive Direct Subsidized Loans is 3 years (150% of 2 years = 3 years). For a one year certificate program, that maximum period is 1.5 years.

 

The maximum eligibility period is based on the published length of the current academic program. This means that the maximum eligibility period can change if a student changes programs. Furthermore, if a student receives Direct Subsidized Loans for one program and then changes to another program, the Direct Subsidized Loans they received for the earlier program will generally count against their new maximum eligibility period.

 

 


Types of Loans - Unsubsidized

Unsubsidized loans provide low interest rates and are available to all students regardless of financial need. The student’s interest begins to accrue from the date the loan is disbursed, and payment is delayed if the student has an in -school, grace or deferment status. If the accruing interest is not paid, it will be added to the principal amount of the loan and increase the repayment amount. Students have the option of paying interest as it accrues, reducing the total cost of the loan. While unsubsidized loans are not generally encouraged for students at Grossmont College due to the increased interest costs, these loans are processed at the student’s request.

 


Types of Loans - Alternative

Grossmont College  will  not  process  Alternative Loans  in  excess  of  the  student’s cost  of education and/or the student’s financial need, regardless of the EFC.

Grossmont College does not certify Alternative Loans during the summer sessions.

Alternative loans will not be certified for students with federal or state grant eligibility

Grossmont College does not participate in the Perkins or PLUS loan program.

 

 


Types of Loans - Plus or Perkins

Grossmont College does not participate in PLUS or Perkins loan programs.

  

 


Types of Loans - Private

Any student applying for a private education loan at Grossmont College must complete a Free Application for Federal Financial Aid (FAFSA) to ensure that all available waivers and grants are available to the student, as well as to encourage students to make use of low-interest loans available through the Department of Education (subsidized if eligible). Student borrowers at Grossmont College are counseled to compare the terms and conditions of Department of Education loans with the terms and conditions of private education loans to determine the more favorable borrowing option.

 

Upon request, the Grossmont College Financial Aid Office will provide the self-certification form for private education loans as required under Sec. 128(e)(3) of the Truth in Lending Act (15 U.S.C. 1638(e)(3) as well as the information required to complete the form, to the extent that Grossmont College possesses the information.

 

 

Entrance Counseling

 

Entrance Counseling

Students who are first-time borrowers of subsidized and/or unsubsidized Direct Student loans must complete Direct Loan Entrance Counseling before loans can be disbursed. Direct Loan Entrance Counseling helps ensure that the borrower understands the terms and conditions of the loan, as well as their rights and responsibilities as a loan borrower. Borrowers who do not complete Direct Loan Entrance Counseling will be unable to receive student loans.

 

Direct Loan Entrance Counseling is available at Student Aid Page. Students will need their FSA ID to log in. Make sure to indicate Grossmont College as the recipient school once the process is complete so that an electronic notice is sent to the school.  

Additional information can be found in the Department of Education's publication "Entrance Counseling Guide"

 

 

Master Promissory Note  

 

Master Promissory Note

The Master Promissory Note (MPN) is the legal document by which you promise to pay your Direct Loans and any accrued interest and fees to the U.S. Department of Education. It also explains the terms and conditions of your loans, provides consumer information and your right and responsibilities as a student borrower.

 

 

Loan Limits

 

Loan Limits

 

Year Dependent Students Independent Students
First year undergraduate Annual Loan Limit
(0 to 29.9 units
$5,550 - no more than $3,500 of this amount may be in subsidized loans $9,500 - no more than $3,500 of this amount may be in subsidized loans
Second-Year Undergraduate
Annual Loan Limit
(30 plus units completed)
$6,500 - no more than $4,500 of this amount may be in subsided loans $10,500 - no more than $4,500 of this amount may be in subsidized loans
Subsidized and Unsubsidized
Aggregate Loan Limit
$31,000 - no more than $23,000 of this amount may be in subsided loans $57,500 for undergraduates - no more than $23,000 of this amount may be in subsidized loans

 

Students approved for one semester only of financial aid, are only eligible for one half the maximum annual loan amount.

Students whose academic status changes from grade level one (0 – 29.9 units) to grade level two (30 or more units) during the academic year will be eligible for grade level two loan amounts to a maximum of $500 for the spring semester. 

 

The HEA of 1998 allows for the adjustment in loan amounts based on professional judgment.  On a case-by-case basis, an eligible institution may refuse to certify a loan amount or make a loan that is less than the student's determination of need (as determined under this part), if the reason for the action is documented and provided in written  form  to  the  student. No eligible institution shall discriminate against any borrower or applicant in obtaining a loan on the basis of race, national origin, religion, sex, marital status, age, or disability status.

 

 


Interest Rates

The interest rates below are effective for all Direct Loans with a first disbursement on or after July 1, 2023. Under the new interest rate structure, all Direct Loans will be “variable-fixed,” meaning students would receive a new rate with each new loan, but then that rate is to be fixed for the life of the loan. There are also interest rate caps at 8.25% for Direct Subsidized Loans and Direct Unsubsidized Loans for undergraduate students. Rates for loans issued in prior years will vary.

 

Loan Type Borrower Type Fixed Interest Rate

Direct Subsidized Loans

Unsubsidized Loans

Undergraduate 5.50%

 

 

 


Origination Fees

Borrowers are required to pay an origination and insurance fee.  These fees are deducted from the proceeds of the loan.  For loans disbursed on or after October 1, 2023, the origination fee is 1.057%. 

 

 

How to Apply for Loans

 

How to Apply for Loans

 

Step 1:  Complete the Free Application for Federal Student Aid (FAFSA) and any other required documents

 

Step 2: Receive an award notification and read and complete the Direct Loan Request Packet, available online or at the Financial Aid Office.

 

Students are required to complete the FAFSA before requesting a loan. Upon the completion of the verification process, student will be notified is they are eligible for student loans.

 

Step 3: Complete Direct Loan Entrance Counseling

 

Step 4:  Complete the Master Promissory Note

 

Step 5:  Return loan request for to the Loan Coordinator in person or via email at jenna_marogi@gcccd.edu

 

 

Deadline to Apply

 

Deadline to Apply

Deadline to apply for loans is one week prior to the end of each semester.

 

 

Borrowers Rights & Responsibilities

 

Borrowers Rights & Responsibilities

Borrowers have the right to:

 

Receive a copy of your promissory note either before or at the time the loan is made

 

Prepay all or part of your loans without a repayment penalty

 

Receive written notice if your loan is sold to a new holder


Apply for deferment for your loan payments for certain specified periods (if eligible

Request forbearance from the holder of your loan if unable to make payments and don't qualify for deferment

 

Receive proof when your loan is paid in full

 

Receive written notice if your loan is sold to anew holder

 

Receive a disclosure statement before repayment on your loan begins, including information about:

 

- Interest rates

- Fees

- Loan balance

- The number of payments

- The amount of each payment

- A grace period after you leave school or drop below half-time status  before your loan payments begin (if applicable)

 


Borrowers agree to:

Repay your loan(s), including accrued interest and fees, even if you do not:

- Complete or find satisfaction in your education

- Complete the program within the regular timeframe

- Obtain employment

 

Attend exit counseling before leaving school or drop below half-time enrollment

 

Notify loan holder within ten days if:

 

- Change your name, address, or phone number

- Drop below half-time status

- Withdraw from school

- Transfer to another school

- Change your graduation date

 

Direct all correspondence to the loan holder or servicer

Make monthly payments on the loan after leaving school, unless granted a deferment or forbearance

 

Loan Disbursements

 

Loan Disbursements

Direct Loans are disbursed by the District Accounting Office via direct deposit with BankMobile.

First time borrowers will have scheduled disbursements 30 days after the beginning of the semester. Retroactive payments are not subject to the 30-day disbursement delay.

Break in eligibility - if a student temporarily dropped below half-time and has resumed enrollment on at least a half-time basis, the school may deliver loan proceeds if the school determines and documents:

 

The student has resumed at least half-time enrollment;

AND

The revised cost of attendance for the portion of the loan period that the student was or will be enrolled at least half-time;

AND

That based on the revisions, the student continues to be eligible for the entire amount of the loan.

 


Late Disbursements

A disbursement is late if it is received after the end of the loan period, or before the end of the loan period but after the student ceased to be enrolled on at least a half-time basis.

 

A student who completes his/her program before being paid must be considered for a late disbursement of a Direct Loan if:

 

the loan was originated before the date the student became ineligible,

 

AND

an ISIR with an official EFC was processed before the student became ineligible (check the “process date” on the earliest ISIR for the school year, keeping in mind that the school may not have received the student’s earliest ISIR if it was not listed). Similarly, a student who withdraws from school before being paid a first disbursement must be considered for a late disbursement, subject to the two conditions listed above. (However, late disbursements for subsequent payment periods may not be made to students who withdraw after receiving a first disbursement).

 

The school must determine that the total amount of prior disbursements and late disbursement do not exceed student's documented expenses for the portion of the loan period completed on at least a half-time basis. School is also required to contact the borrower in cases where the borrower is eligible for a late disbursement or post-withdrawal disbursement to confirm whether the loan funds are still needed.

 


The school may not:

 

Deliver a late first disbursement if student is subject to delayed delivery and student's last recorded date of attendance is earlier than the 30th day of the loan period.

Deliver a late second or subsequent disbursement unless the student graduated or completed the loan period

Deliver any portion of the loan considered awarded for a payment period that the student was not enrolled on a least a half-time basis.

Deliver a late disbursement if it is received more than 60 days after the earlier of the above dates.

Deliver proceeds for which student does not qualify after a school's determination of adjusted costs and financial need

 

Loan Cancellation

 

Loan Cancellation

Federal Direct Loan borrowers have the right to cancel or reduce all or a portion of their Federal Direct Loan and have their loan proceeds return to the holder of the loan.  Students must notify the Financial Aid Office within 14 days of the loan(s) being credited to their Grossmont College account by completing the Award Cancellation Request Form Students wishing to return any portion of their loan(s) after this period would need to contact their loan servicer about making payments. 

 

Exit Loan Counseling

 

Exit Loan Counseling

All students who receive a loan must complete mandatory online loan exit counseling through the Department of Education. Loan exit counseling provides important information regarding repayment, deferment, and default prevention and must be completed when the borrower:

 

Withdraws from college;
OR

Drops below half-time units;

OR

Transfers to another college;
OR

Graduates

 

Visit the Student Aid website to complete loan exit counseling and be sure to select Grossmont College when asked, to ensure the Financial Aid Office will receive confirmation that the student completed the requirement. Students will need their FSA ID and password to complete the loan exit counseling. Upon completion of the exam, students will print the confirmation page and sent to the Financial Aid Office that they have completed the exit counseling successfully.

 

 

Repayment Plans

 

Repayment Plans

The Direct Loan Program offers a number of different loan repayment plans designed to meet the needs of most borrowers. Direct Loans are funded by the U.S. Department of Education through schools and are managed by a loan servicer, under the supervision of the Department. The Direct Loan Program allows you to choose your repayment plan and to switch your plan if your needs change. There is also the possibility of having loans forgiven under the Public Service Loan Forgiveness (PSLF) program. Consult the Federal Student Loan Repayment Plans website for details. If you currently have a Direct Loan and would like the exact payment amount on your loan, you can find it out by contacting your loan servicer.

 

 

Default Prevention & Consequences of Default

 

Default Prevention & Consequences of Default

Taking out a Federal Direct Student Loan will have an impact on your future credit and financial aid eligibility. Failure to make regularly scheduled payments on your student loan can lead to a defaulted loan.

Please make sure to contact the Direct Student Loan at www.direct.ed.gov  if you have any difficulties in paying your loan.  This includes economic hardship, unemployment, temporary disability, or returning to school at least half-time. The government will give you several options to temporary defer your loan payments.  

 

 


Consequences of Default

You will not be eligible for further Federal Student Aid

 

- You will lose your deferment options
     

- Your loan may be turned over to a collection agency

- Your credit rating will be damaged

- Your wages can be garnished and your tax refund can be taken away

- You may be subject to legal action by the federal government

-  Your total debt may be increased by collection fees, attorney fees, late fees, court costs and additional interest

 

 


Bankruptcy

If the school is notified by the lender of a bankruptcy action and is instructed to return any Title IV loan funds that have not been released to the borrower, the school must immediately return any undelivered funds to the lender. In addition, if the school receives notification that a Stafford or PLUS borrower has filed a bankruptcy action after the school certified the loan but before the funds have been delivered to the borrower, the school should return any undelivered funds. The school must include an explanation that the funds are being returned because the borrower has filed for bankruptcy and must attach a copy of any documentation it possesses regarding the bankruptcy.

 

 

 

Disclosure

Any and all loans activated at Grossmont College will be submitted the National Student Loan Data System (NSLDS), and will be accessible by guarantee agencies, lenders, and schools determined to be authorized users of the data system.