Loans are financial aid funds that must be paid back, typically with interest. Loans come in two main types: federal loans from the Direct Loan Program and private loans from third-party lenders. In addition to scholarships and grants, loans are one of the most common ways students with financial need bridge the gap between their Expected Family Contribution (EFC) and their total Cost of Attendance.
DigiPen participates in the Direct Loan Program, the largest federal student loan program offered by the U.S. Department of Education. Direct Loans are low-interest loans for students and parents to help pay for the cost of a student’s education beyond high school. Students can choose from a variety of flexible repayment plans designed to meet the needs of different borrowers. Direct Loans are the most common form of loans for undergraduate students seeking financial aid to fund their higher education.
To receive Direct Loans, you must be enrolled as at least a half-time student and you must complete the Free Application for Federal Student Aid (FAFSA) to determine your eligibility. If you are deemed eligible, you will have the option of enrolling in a Direct Loan Program when you receive your award offer letter. To receive your loans once school begins, you must sign a Master Promissory Note and complete entrance counseling on www.studentloans.gov.
Types of Direct Loans
There are two types of Direct Loans: Direct Subsidized Loans, for which the government pays the interest while you are in college; and Direct Unsubsidized Loans, for which you are responsible for paying all the interest on the loans, during college and after. You may receive both types of loans at the same time.
Direct Subsidized Loans are awarded to undergraduate students who demonstrate financial need as determined by the FAFSA. The federal government pays the interest on these loans while they are in deferment. The deferment period includes when you are in college and during the six-month grace period after you graduate, leave school, or enroll as a less-than-half-time student.
Direct Unsubsidized Loans are available to all eligible students and do not require students to demonstrate financial need. You are responsible for paying all the interest on an unsubsidized loan, but you can allow it to accumulate while you are in college and during the grace period. If you do, the interest will be “capitalized” — that is, added to the amount you borrowed when repayment begins, and future interest will be based on the new, higher loan amount.
The Direct Parent Loan for Undergraduate Students (Direct PLUS Loan) enables parents or stepparents to borrow up to the total cost of their dependent child’s education, minus any other aid the student receives. Only undergraduates who are dependent students are eligible for Direct PLUS Loans.
Disbursement of Direct Loans
Once you have determined your eligibility for Direct Loans and enrolled in a Direct Loan program, the U.S. Department of Education will disburse the agreed-upon loan amounts and apply them to your tuition balance throughout the academic school year. Half of your annual Direct Loan is disbursed after the beginning of the fall semester, and the other half is disbursed after the beginning of the spring semester.
Keep disbursement dates in mind while calculating student living expenses for your first month at school, as loan funds may not be immediately available at the start of the semester. DigiPen’s Accounting Department requests Direct Loans the first week of fall and spring semester. Once the money is disbursed, the Accounting Department deducts all tuition and fees due to the school, then issues the student (in the case of Direct Loans) or parents (in the case of Direct PLUS Loans) any excess funds for living expenses within 14 days. Parents can elect to have the refund amount applied directly to the student’s account by signing the Direct PLUS Loan authorization form attached to the award offer letter.
In general, you should be prepared to cover living expenses for the month of September (fall semester) and January (spring semester) of every school year while you wait for Direct Loan funds to be disbursed to your account.
Students may choose to have excess Direct Loan funds issued back to the government instead of their bank account. If you decide that you do not want your excess funds to obtain books and supplies, you must indicate this to the Office of Financial Aid by email or in writing prior to the start of each semester.
Direct Loan Amounts
This table on the Federal Student Aid website shows the maximum amounts students can borrow through the Direct Loan Program based on their dependency status, including the total amount available for borrowing and how much of that total can come from Direct Subsidized Loans (the remainder can be borrowed as Direct Unsubsidized Loans). The final row lists the total aggregate loan limits for each situation, which is the total amount a student can borrow over the course of their college career.
Graduate Direct Loans
Unlike undergraduates, graduate students are not eligible for Direct Subsidized Loans, but graduate students may be eligible for Direct Unsubsidized Loans and Direct Graduate PLUS Loans. The process to apply for graduate Direct Loans is nearly identical to the undergraduate process, and can be completed at www.studentloans.gov.
National Student Loan Data System (NSLDS)
All information related to federal student aid programs (including Subsidized, Unsubsidized, PLUS, and Graduate PLUS Loans) is reported to the National Student Loan Data System (NSLDS), whether the borrower is a student or parent. The NSLDS is accessible to guaranty agencies, lenders, and institutions determined to be authorized users of the data system. Students and parents may obtain access to this website to track individual loans at www.nslds.ed.gov.
Private loans are often referred to as “private educational loans” or “alternative loans.” Private loans are based on your credit history and can help bridge the gap between the your other financial aid funds and the actual cost of your education. These loans are offered by private lenders and should be considered only after exhausting all other sources of funding, including federal loans and grants.
The Office of Financial Aid is available to discuss with all students, and their parents, the financial aid options available to them. Students and parents may qualify for Federal loans or other assistance programs under Title IV of the Higher Education Act. Title IV program loans (including Direct Loans) may have more favorable terms and conditions than private educational loans, which do not fall under Title IV.
Before a student can obtain a private loan from a private educational lender, the student must provide the lender with a completed and signed Private Education Loan Self-Certification Form.
Preferred Lender Lists: DigiPen does not have any preferred lender arrangements.