Subsidized and unsubsidized loans (sometimes called Stafford Loans or Direct Stafford Loans) are federal student loans that you may qualify for when you complete the FAFSA. Both of these loans are long-term and low interest. For the 2022-2023 academic year, both undergraduate loan types have a fixed interest rate of 4.99% for the life of the loan.
To see if you qualify for a subsidized or an unsubsidized student loan, you must complete your FAFSA and financial aid file. You must also be making satisfactory academic progress. Any loan amount you are entitled to will be a part of your Award Letter and is not something you need to apply for separately.
SUBSIDIZED - If your completed FAFSA and financial aid file shows financial need, you may be offered a subsidized student loan. A subsidized student loan does not begin to accrue interest while you're in school, during your 6 month grace period, or during a period of deferment.
UNSUBSIDIZED - There is no requirement to demonstrate financial need for the unsubsidized student loan, but a completed FAFSA and financial aid file is still required. An unsubsidized student loan begins to accrue interest after it disburses on your student account. Interest payments are not required while you're in school, during your 6 month grace period, or during a period of deferment, but the interest will be added to the principal balance. This makes an unsubsidized student loan less favorable than the subsidized student loan, but it is still is more favorable than many private, credit based loans.
A student may be offered a combination of both subsidized and unsubsidized on their financial aid package.
ENTRANCE COUNSELING & MASTER PROMISSORY NOTE - If you are a first-time loan borrower, you will need to complete mandatory entrance counseling and a master promissory note (MPN) on StudentAid.gov before your loans are noted on your account. This federal requirement goes over your rights and responsibilities as a borrower. The MPN is your agreement to pay back your federal loans.
When you are able to complete the entrance counseling and MPN, you will be notified by Student Financial Services and given instructions on how to complete them. For fall enrollment, this typically occurs in June. For spring enrollment, this typically occurs in December.
ORIGINATION FEE - Before any federal loan is applied against your account, your loan servicer charges an origination fee. This is a small fee that the loan servicer collects for processing your loan. When a federal student loan is credited on your student account as a payment, the origination fee is taken into account. As of October 1, 2021, the origination fee is 1.057% and this fee may change again after October 1, 2022. This percentage comes off of your loan before MCLA receives your funding. (For example, during the 2021-2022 academic year, a $1,000.00 loan would net $990.00 after the origination fee.)
If you are in a position where you want to borrow a precise amount or want to see how the origination factors in, we have a loan fee calculator available as a planning tool for you to use. You would select "Stafford" as the loan type.
YEARLY AMOUNTS - A student's maximum amount of eligibility for loans is based on both need (for subsidized loans) and grade level. Grade level is determined by credits earned.
|Yearly Combined Maximum for Subsidized and Unsubsidized Loans||Credit Hours Earned / Year|
|$3,500.00||0 - 29 credits earned (1st year)|
|$4,500.00||30 - 59 credits earned (2nd year)|
|$5,500.00||60 + credit hours earned (3rd - 5th year)|
|Up to $20,500||Graduate Students Only|
LIFETIME AGGREGATE LIMITS - In addition to maximum yearly borrowing, there is a lifetime aggregate for federal subsidized and unsubsidized student loan borrowing. Your lifetime aggregate limit would include borrowing at any school you have attended. A student cannot exceed their aggregate amount. It is important to note that most students do not reach their lifetime aggregate limit if they complete their degree program in four academic years.
REPAYMENT - With the unsubsidized and subsidized student loans, you are not required to make payments while you're in school at least half time, during your 6 month grace period, or during a period of deferment. Some students like to pay down their student debt while in school, but it is not required.
When you graduate, withdraw/take a leave of absence from MCLA, or drop below half time credit hours, you will enter your 6 month grace period. This grace period allows you time to get financially settled before you begin repayment. During that time, you will be contacted by your loan servicer.
A direct PLUS loan is federal, credit-based loan that a biological or adoptive parent of a dependent undergraduate student can apply for in their name on the student's behalf. The student would not be listed as a co-signer on a PLUS loan and it would be up to the parent borrowing the loan to repay it. The interest rate of the PLUS loan for the 2022-2023 academic year is 7.54% and is fixed for the life of the loan.
APPLYING - To be eligible for a PLUS loan, a completed FAFSA and any requested verification documents must be on file. The student must be making satisfactory academic progress. A parent must log into StudentAid.gov with their FSA user ID to complete a PLUS loan application.
ENTRANCE COUNSELING & MASTER PROMISSORY NOTE - Like the subsidized and unsubsidized student loans, parent borrowers of the PLUS loan are required to complete mandatory entrance counseling and a master promissory note (MPN) in order for the loan to be applied on a student's account. This federal requirement goes over the parent's rights and responsibilities as a borrower. The MPN is the parent's agreement to pay back the loan.
If a parent is approved for a PLUS loan, the Student Loan Coordinator will reach out to the parent borrower about the requirements needed after the loan is certified.
ORIGINATION FEE - Before a PLUS loan is applied against a student's account, the loan servicer charges an origination fee. This is a small fee that the loan servicer collects for processing the PLUS loan. As of October 1, 2021, the origination fee is 4.228%.
When borrowing a PLUS loan, the origination fee should be factored in to ensure a parent is borrowing the correct amount. We have a loan fee calculator available as a planning tool for parents to use. You would select "Parent PLUS/Grad Plus" as the loan type.
REFUNDS - If there is any overpayment on a student's account from a PLUS loan, this will be refunded to either the parent or the student based on the application data.
PLUS DENIAL - If a parent is not credit approved for the PLUS loan or declined, the student may be eligible for additional federal direct unsubsidized student loan funding in their name. The exact funding a student is eligible for varies based on unmet need, but is up to an additional $4,000.00 for the year for freshmen and sophomores (0-59 earned credit hours) or up to an additional $5,000.00 for the academic year for juniors and seniors (60+ earned credit hours.) In order for MCLA to review a student's eligibility for additional loan funding, a rejected PLUS loan must be on file.
REPAYMENT - A parent's PLUS loan will enter repayment 60 days after the funds are fully disbursed and the repayment term is up to 10 years. However, a parent PLUS loan borrower is allowed to defer payments while the student is in school at least half time and for a 6 month grace period after they graduate or leave school. It would be up to the borrower to make payment arrangements with their servicer.
If you have questions about the federal loan programs listed above, please contact Student Financial Services at 413.662.5219 or FinAid@mcla.edu.