As a student, you may be offered loans as part of your school's financial aid package if you apply for financial help. If you decide to take out a loan, be sure you know who is lending money to you and what the terms and conditions are. Student loans are available from the federal government, private lenders such as banks and financial institutions, and other organizations. Federal student loans usually have more benefits than loans from banks or other private sources.
The United States Department of Education offers the Direct Loan program to help students pay for their education after high school. Borrowing a student loan is often a student's first experience with lending.
The three forms of federal student loans are included in Direct Loans:
- Direct Subsidized Loans. You are not accountable for any accrued interest while in school. Only undergraduates are eligible to apply.
- Direct Unsubsidized Loans. From the day of issuance, you are responsible for all accrued interest.
- Direct PLUS Loans. A credit-based loan for graduate students and parents of dependent undergraduate students.
Entrance/Exit Counseling
Before obtaining funds from the federal student loan programs, you must first complete an admission counseling session at studentloans.gov. Then, when you graduate or drop below half-time enrollment levels, you must also complete the exit counseling session at the same web portal.
MPN
The Master Promissory Note (MPN) is a legally enforceable contract that outlines the terms and conditions and additional information of federal student loans. By signing a Master Promissory Note, you legally promise to repay the amount borrowed, plus any accrued interest and fees. In addition, what you owe, how interest is computed, when interest is charged, accessible repayment plans, late payments, collection charges, and deferment and cancellation options are outlined in the Master Promissory Note.
There is one MPN for Direct Subsidized/Unsubsidized Loans and a different MPN for Direct PLUS Loans. These may be signed electronically at studentloans.gov.
Loan Disclosure Statement
For each Direct Loan you obtain through an MPN, you'll get a disclosure statement that includes details about the loan, such as the loan amount, costs, and estimated distribution dates and amounts. In addition, the MPN will identify the amount of any student loan you receive and any additional loan stipulations.
Bottom Line!
Keep a copy of all correspondence from your school or lender, including promissory notes, documents, and statements that you sign. Then, when you start repaying your loan or at other times when you require information on the terms of your loan, such as deferment or forbearance, you'll need to refer to this information.
