Consumer Information
Borrower Disclosure
Your financial aid award letter displays the maximum amount of federal and state grants you are eligible for, before listing your federal student loan eligibility. Available institutional scholarship, based on financial need as determined by the Free Application for Federal Student Aid (FAFSA), is also packaged before federal student loans.
The first loan to be packaged to each student is the Federal Direct Stafford Subsidized loan, which has an interest rate of 4.5% for undergraduate loans disbursed during 2010-11. The limits of loan eligibility are as follows: $3,500 for a first year student, $4,500 for a second year student, $5,500 for a third/fourth/fifth year undergraduate, $8,500 for a graduate student (6.8% interest). After financial need has been exhausted, the remaining portion of this loan may be borrowed as a Federal Direct Stafford Unsubsidized loan.
Note that the amount shown on your award letter is after fees have been subtracted. Fees are kept by the Direct Loan Servicing Center. For example, the loan may have a 1.5% origination fee with a rebate of 1%. The net 0.5% fee is subtracted from your loan. For example a first year undergraduate student may be eligible for a $3,500 loan but the award letter shows the disbursed amount of $3,482.50. The rebate will be added back onto your loan after you enter repayment if you do not make your first six payments on time.
Interest rates for Federal Subsidized Stafford loans borrowed in prior years are as follows: 6% for undergraduate loans borrowed during 2008-09; 6.8% for loans borrowed during 2007-08 and 2006-07; and for loans borrowed between July 1, 1998 and June 30, 2006 the interest rate is variable, set each July 1, currently 4.21% during repayment.
The second federal student loan packaged is the Federal Direct Stafford Unsubsidized loan, after all subsidized loan eligibility has been exhausted. The interest rate is 6.8% since the 2006-07 award year, and variable set each July 1 for loans borrowed before 2006-07. Interest on unsubsidized loans accumulates or may be paid by the borrower during deferment and grace periods, including the period while in school.
An undergraduate dependent student may borrow an additional Federal Direct Stafford Unsubsidized loan to the maximum amount of $2,000. An undergraduate independent student may borrow an additional maximum amount of $6,000 for the first or second year and $7,000 for other undergraduate years, and $12,000 for Masters and PhD years. Students are also limited in loan eligibility by the cost of attendance which is itemized on the financial aid award letter.
There are aggregate loan limits as well:
Federal Perkins Loans
$11,500 for students who have not yet completed two years;
$27,500 for undergraduates;
$60,000 for graduates
Federal Stafford Loans
$31,000 for dependent undergraduates (no more than $23,000 subsidized);
$57,500 for independent undergraduates (no more than $23,000 subsidized);
$138,500 for graduate students (no more than $65,500 subsidized)
Other loans, such as Federal Direct Parent PLUS loans may be borrowed by parents of dependent undergraduate students, Federal Direct Graduate PLUS loans may be borrowed by Graduate students who do not have adverse credit and have exhausted all other sources of aid, and private educational loans if needed.
During 2008-09, 67% of undergraduate students borrowed the maximum amount of Perkins and Stafford subsidized loans available. Most dependent undergraduates borrowed and additional $2,000 unsubsidized Stafford loan, and most independents borrowed and additional $5,000 unsubsidized loans. (Other students did not attend full time or did not qualify for subsidized loans.)
| Typical loan amounts borrowed per undergraduate student for 2008-09: | |
|---|---|
| Dependents | $8,750 subsidized and $2,000 unsubsidized |
| Independents | $8,750 subsidized and $5,000 unsubsidized |
Interest accumulating on $2,000 unsubsidized loans would be $136 per year for dependents, and on $5,000 would be $340 per year for independents.
Total projected debt for a dependent undergraduate for four years would be $44,000 or $57,000 for an independent undergraduate. Loan repayment, over a ten year period would be about $500 per month for a dependent undergraduate and $650 per month for an independent undergraduate.
Loan repayment may be made over a standard ten year repayment period, or may be extended for up to 25 years, or may be repaid based on earnings with the unpaid balance forgiven after 25 years (or ten years in the case of a Public Service occupation).
Repayment begins after a six to nine month grace period, which starts after you cease attending school on at least a half time basis. There are also other deferments such as the Economic Hardship Deferment.
These loans must be repaid. The consequences of defaulting on a federal student loan are as follows:
- Wages may be garnished
- US Department of Education may file a lawsuit for collection
- Federal and state income tax refunds may be witheld
- Negative credit history reporting for seven years
- Entire unpaid balance, plus interest and penalties immediately due
- Ineligible to receive further federal student aid
- Referral to a collection agency
- Could loose a professional license
Borrowers must notify the lenders of any change in address, telephone number, name, or enrollment change. Lenders used most frequently by borrowers while attending Maharishi University of Management:
| Perkins Office, Maharishi University of Management | 641-472-7000 x4125 | perkins@mum.edu |
| Federal Direct Loan Service Center | www.dl.ed.gov | |
| Iowa State Bank / Iowa Student Loan | 800-243-7552 | www.studentloan.org |
| US Bank / Iowa Student Loan | 800-243-7552 | www.studentloan.org |
| CitiBank | 800-967-2400 | www.studentloan.com |