Federal Direct Loans are low-interest loans from the U.S. Department of Education that are administered by Mercyhurst University. It is the U.S. Department of Education's major form of self-help aid and is available through the William D. Ford Federal Direct Loan Program. There are two types of Federal Direct Loans: subsidized and unsubsidized. Federal Direct Loans replace the Federal Stafford Loans, which were formerly known as Federal Guaranteed Student Loans.
Because the funding for these loans comes straight from the US Department of Education, you do not have to find a lender to borrow through this program. Please disregard any offers you may receive about the Federal Stafford Loan program through private lenders. Since Mercyhurst University is a Federal Direct Lending institution, you may not use a private lender to apply for a Federal Stafford Loan.
Federal Direct Subsidized Loan
A Federal Direct Subsidized Loan is available to help meet financial need after other resources are subtracted or to the annual maximum loan limit, whichever is lower. The interest rate in effect for 2009-2010 for undergraduate students is fixed at 5.6% and for graduate students is fixed at 6.8%. Interest begins to accrue for the student 6 months after the student graduates or ceases to be enrolled at least half time.
Federal Direct Unsubsidized Loan
A Federal Direct Unsubsidized Loan is not based on your financial need. If your Estimated Cost of Attendance is greater than your financial aid and you have not reached your annual maximum loan limit through the federal Direct Subsidized Loan, you may qualify for Federal Direct Unsubsidized Loan. The interest rate for federal Direct Unsubsidized loans is fixed at 6.8%. You are charged interest on this loan from the time the loan is disbursed until it is paid in full. You have the option to pay on the interest while in school, or to allow the interest to accumulate, which adds to the principal amount of the loan and increases the amount to be repaid.
Federal Direct Loan Interest and Fees
The interest rate in effect for 2009-2010 for Federal Direct Subsidized loans for undergraduate students is fixed at 5.6% and for graduate students is fixed at 6.8%. The interest rate for Federal Direct Unsubsidized loans is fixed at 6.8%. Subsidized loans do not accrue interest until loan repayment begins, whereas unsubsidized loans accrue interest from when the loan is disbursed.
In addition to interest, all Federal Direct Loans have a 1.5% origination fee. However, you will receive an upfront 1% rebate at the time of origination based on paying your first 12 monthly payments on time, so the assessed fee is only ½ percent. This fee reduces the amount that disburses to your student account. For example, if you borrow $3,500 for the academic year, $17.50 will be deducted from your loan amount and paid directly to the U.S. Department of Education.
How to Apply for a Federal Direct Loan (Subsidized or Unsubsidized)
To apply for a Federal Direct Loan, you must complete the FAFSA. To be eligible, you must be enrolled at least half-time and meet other general federal student aid eligibility requirements. If you qualify for a Federal Direct Loan, it will be included in your Financial Aid Award Letter.
E-sign the Federal Direct Loan Master Promissory Note (MPN)
Students borrowing a Federal Direct Loan must complete a Federal Direct Loan Electronic Master Promissory Note ( MPN ) before loan money can be disbursed. Once a Federal Direct Loan MPN is completed and the loan is disbursed to you by Mercyhurst University, you do not have to sign Federal Loan MPN again (it is valid for 10 years).
To complete the MPN, you must go to www.dlenote.ed.gov. You will need your U.S. Department of Education PIN to sign your MPN electronically.
After you sign your MPN , electronic notification will be sent to Mercyhurst University. Mercyhurst University may not disburse your Federal Direct Loan unless you have completed your MPN and have completed Entrance Counseling .
Federal Direct Loan Entrance Counseling
The federal government requires a student 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, and your rights and responsibility. It concludes with a 15-question quiz. You must get all answers correct to successfully complete Entrance Counseling .
Entrance Counseling can be completed at www.dlssonline.com . You will need your U.S. Department of Education PIN
to successfully complete Entrance Counseling. After you complete Entrance Counseling , the results will be sent electronically to Mercyhurst University, although you may wish to print a copy of the rights and responsibilities page for personal records.
Receiving Federal Direct Loan Funds
When Mercyhurst University is notified by the Federal Direct Loan Processor that they have a valid MPN on file for you and you have completed Entrance Counseling , your Federal Direct Loan will automatically be credited to your student account as long as all other federal student aid eligibility requirements are met.
Request Reduction or Cancellation of Federal Direct Loans
You have the right to reduce or cancel your Federal Direct Loan offer. You may do so by making a notation on your Financial Aid Award Letter and returning it to the Office of Student Financial Services. Or, you may complete a Financial Aid Adjustment Form and submit it to the Office of Student Financial Services.
Federal Direct Loan Limits
The federal government sets limits on the amount of money a student can borrow. Mercyhurst University awards students that have filed the FAFSA the maximum amount eligible under such limits. The annual limit applies to the most a student can borrow in one academic year, while the aggregate limit applies to the maximum a student can borrow in a lifetime. Independent students and dependent students whose parents are unable to borrow a PLUS loan are eligible for additional Federal Direct Unsubsidized Loan.
Federal Direct Loan Exit Counseling
The federal government requires that students participate in Exit Counseling prior to leaving or graduating from college. To complete Exit Counseling, go to www.dl.ed.gov . You will need your U.S. Department of Education PIN to successfully complete Exit Counseling .
During Exit Counseling you will learn about additional deferment and forbearance and how to get the necessary forms. Even though you have a six month grace period, the Exit Counseling process will help you set up a repayment plan, a direct withdrawal and a payment date. The Direct Loan Servicing Center, who handles all Federal Direct Loan repayments, hosts Exit Counseling .
Federal Direct Loan Repayment
Repayment of the Federal Direct Loan begins 6 months after the student graduates or ceases to be enrolled at least half time.
Additional Federal Direct Loan Information
Contact Federal Direct Loan Servicing Center at myedaccount.com or call them at (800) 848-0979, TTY (800) 848-0983.