Introduction to U.S. loans

Effective July 1, 2010, the US Department of Education requires all schools disbursing US government loans to do so through the US Government's William D. Ford Federal Direct Loan Program. This means that the US government will be electronically disbursing student loan funding directly to schools without the participation of any third parties (i.e, banks or financial institutions).

Under the Direct Loan program, your lender is the United States Department of Education.

Available funds

Your responsibilities as a student

Glossary of U.S. Loan terms

Award Year: The 12-month period during which you attend the University, and for which your aid has been awarded.

Capitalization: The process by which interest is added to the principal loan amount if you choose not to make interest payments while at the University or in forbearance. This process increases the amount that must be repaid and will make your monthly payment larger.

Cost of Attendance (COA): The total amount it will cost you to go to school. This amount includes tuition fees, living expenses, books, insurance, travel and transportation. The COA is determined by the FAAO, using US guidelines.

Default: The failure of a borrower to repay the loan under the terms of the promissory note. If your repayment instalments are monthly, you are considered in default if you do not pay for 270 consecutive days. If your instalments are less frequent, default is declared after 330 consecutive days of non-payment.

Deferment: The temporary postponement of loan payments; during this time, you do not have to pay either principal or interest.

Delinquency: The status of a loan when payment is late. Delinquency can lead to default.

Disbursement: The lender's payment of loan funds to the University. Disbursement is usually made in two or more instalments during the year in accordance with US Department of Education regulations.

Expected Family Contribution (EFC): The amount that you and family are expected to contribute toward the Cost of Attendance. This amount is based on your or your family's income and assets.

Free Application for Federal Student Aid (FAFSA): The application that you must file to apply for financial aid. The FAFSA is printed and distributed free of charge by the U.S. Department of Education. It is also available online.

Forbearance: The temporary postponement or reduction of payments because of the borrower's financial difficulties. Forbearance may also be an extension of the repayment period. You are charged interest during forbearance.

Full-time: Enrolment in twelve or more credits per semester.

Grace Period: A period of time between when you graduate or drop below half-time status and when repayment begins. For Direct Loans, the grace period is six-months. There is no grace period for PLUS Loans. If you re-enter school at least half-time during your grace period, the grace period is renewed for another six months. Therefore, you have the full grace period available when you leave school again. However, if you use all your grace period at once and re-enter school, you will not be eligible for another grace period.

Half-time: Enrolment in six or more credits per semester.

Interest: The fee that is charged by the lender in exchange for lending the money, the interest rate, usually expressed as a percentage of the loan amount, may stay the same for the term of the loan (fixed rate) or it may change periodically (variable rate). Interest rates for Direct loans are fixed, whereas those of alternative loans may vary.

Master Promissory Note (MPN): A legally binding contract that you sign, thereby agreeing to repay the loan. It contains the loan terms and conditions, including how and when the loan must be repaid.

Principal: The total sum borrowed. This includes the original amount borrowed plus any interest that has been capitalized. Additional interest charges are based on this amount.

Student Aid Report (SAR): Report of the information you provided in the FAFSA. It contains your EFC.

Subsidized Loan: A loan made on the basis of financial need. The federal government pays the interest on these loans while you are enrolled at least half-time, during the grace period, or during authorized periods of deferment.

Three-Quarter Time: Enrolment in 9 to 11.75 credits per semester.

Unsubsidized Loan: A loan not based on financial need. You are responsible for paying all interest that accrues throughout the life of an unsubsidized loan. During in-school status, deferment, and forbearance periods, you may choose to pay the interest charged on the loan or allow the interest to be capitalized.

Withdrawn: A student is considered to have withdrawn from a payment period or period of enrollment if, in the case of a program that is measured in credit hours, the student does not complete all the days in the payment period or period of enrollment that the student was scheduled to complete.

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