What is a Federal Direct Student Loan?
Federal Direct Student Loans are a long-term financial obligation. Getting a loan means, you are responsible for repaying the money you borrowed including interest, costs and fees.
Read on for more valuable information regarding students loan programs and Woodland Community College Direct Loan application and disbursement process.
Who is eligible to take out federal student loans?
There are basic Federal Student Aid eligibility criteria and loan program-specific eligibility criteria:
Federal Student Aid Eligibility Criteria
- demonstrate financial need:
- be a U.S. citizen or an eligible noncitizen;
- have a valid Social Security number (with the exception of students from the Republic of the Marshall Islands, Federated States of Micronesia, or the Republic of Palau);
- be enrolled or accepted for enrollment as a regular student in an eligible degree or certificate program;
- maintain satisfactory academic progress (SAP);
- sign the certification statement on the Free Application for Federal Student Aid (FAFSA®) form stating that:
- you are not in default on a federal student loan,
- you do not owe money on a federal student grant; and
- you will use federal student aid only for educational purposes; and
- show you’re qualified to obtain a college education by
- having a high school diploma or a recognized equivalent such as a General Educational Development (GED) certificate;
- completing a high school education in a homeschool setting approved under state law; or
- enrolling in an eligible career pathway program and meeting one of the “ability-to-benefit” alternatives.
Loan Program-specific Eligibility Criteria
- Complete an Loan Entrance Counseling Session, a tool to ensure you understand your obligation to repay the loan;
- Sign a loan contract called a Master Promissory Note agreeing to the terms/repayment of the loan; and
- Complete Exit Counseling when the borrower drops below 6 units during a semester. Exit Counseling is completed at: https://studentaid.gov/exit-counseling.
- Additional information is available in the federal publication Direct Loan Exit Counseling Guide for Direct Loan Borrowers.
What should I consider when taking out federal student loans?
Before you take out a loan, it’s important to understand that a loan is a legal obligation that makes you responsible for repaying the amount you borrow with interest. Even though you don’t have to begin repaying your federal student loans right away, you shouldn’t wait to understand your responsibilities as a borrower. Get the scoop: Watch this video about responsible borrowing.
How to Apply?
To apply for a Direct Loan, you must first complete a Free Application for Federal Student Aid (FAFSA®) form. Woodland Community College will use the information from your FAFSA to determine how much student aid you are eligible to receive.
Conditions for Direct Loan Eligibility
- Received a Financial Aid Award Notification email for the current academic year, which indicates your financial aid file is complete and your eligibility for federal aid has been determined.
- You must be enrolled in a degree-granting or eligible certificate program (Associate degree or Certificate of Achievement).
- You must be registered in and actively attending a minimum of 6 units (at least half-time) per semester.
- You must not be in default on any type of student loan.
- You must not owe a repayment on a federal student grant.
- You must meet Satisfactory Academic Progress (SAP) requirements.
Students who do not meet these eligibility requirements cannot apply for a student loan or may be subject to a delayed process. Please plan accordingly.
Steps to Requesting a Direct Loan at Woodland Community College
- Contact the Financial Aid Office to request a Direct Loan Interest Form – upon request, form will be made available in Self Service Financial Aid, Required Documents.
- Students who meet the minimum Direct Loan eligibility criteria will be preliminarily approved and provided forms required to complete the loan request packet via their student (YCCD) email. Eligible students must attend an Entrance Counseling session, even if a student loan was received in a past year. Coordination of this session will be communicated via student (YCCD) email.
- Students who do not meet these criteria will receive a denial notification via their student (YCCD) email and will be unable to receive a Direct Loan.
- Submit a completed Loan Request Packet.
- Loan request packets must be submitted to the Financial Aid Office by applicable deadline provided in email notification to student (YCCD) email. Incomplete packets and/or those submitted beyond the applicable deadline may be denied and/or delayed.
- Reach out to the Financial Aid Office for more details and/or questions regarding the application process (office hours for Financial Aid at Woodland and Lake campuses here.)
Semester deadlines for Direct Loan requests are available in the Financial Aid Office or by email, WCCFinancialAid@yccd.edu.
Upon receipt of complete loan request packet, the WCC Financial Aid Office will process student loan request and add the award to the student’s fiancial aid award package accessible in Self Service Financial Aid MyAwards or Offer Letter.
Types of Direct Loans
The U.S. Department of Education’s federal student loan program is the William D. Ford Federal Direct Loan (Direct Loan) Program. Under this program, the U.S. Department of Education is your lender. There are two types of Direct Loans available:
- Direct Subsidized Loans are loans made to eligible undergraduate students who demonstrate financial need to help cover the costs of higher education at a college or career school. The U.S. Department of Education pays the interest on a Direct Subsidized Loan while you’re in school at least half-time, for the first six months after you leave school (referred to as a grace period), and during a period of deferment (a postponement of loan payments).
- Direct Unsubsidized Loans are loans made to eligible undergraduate, graduate, and professional students; there is no requirement to demonstrate financial need. The student borrower is responsible for paying the interest on a Direct Unsubsidized Loan during all periods.
Borrowing Limits
| Year | Dependent Students | Independent Students |
|---|---|---|
| First-Year Undergraduate Annual Loan Limit | $5,500—No more than $3,500 of this amount may be in subsidized loans. | $9,500—No more than $3,500 of this amount may be in subsidized loans. |
| Second-Year Undergraduate Annual Loan Limit | $6,500—No more than $4,500 of this amount may be in subsidized loans. | $10,500—No more than $4,500 of this amount may be in subsidized loans. |
| Subsidized and Unsubsidized Aggregate Loan Limit | $31,000—No more than $23,000 of this amount may be in subsidized loans. | $57,500 for undergraduates—No more than $23,000 of this amount may be in subsidized loans. |
Interest Rates and Fees
If you receive a federal student loan, you will be required to repay that loan with interest. Make sure you understand how interest is calculated and the fees associated with your loan. Both of these factors will impact the amount you will be required to repay.
Interest
| Loan Type | Borrower Type | Fixed Interest Rate |
|---|---|---|
Note: The interest rates shown above are fixed rates for the life of the loan.
- Understanding interest rates and fees — Find out how interest is calculated.
- Information for military members — If you are a member of the military, you may be eligible for special interest benefits relating to your federal student loans.
Remember that interest rates and fees are generally lower for federal student loans than private student loans.
Fees
There is a origination fee on all Direct Subsidized Loans and Direct Unsubsidized Loans. The loan fee is a percentage of the loan amount and is proportionately deducted from each loan disbursement. The percentage varies depending on when the loan is first disbursed, as shown in the chart below.
| Loan Type | First Disbursement Date | Loan Fee |
|---|---|---|
*As an example, the loan fee on a $5,500 loan would be $58.13.
- Loans first disbursed prior to Oct. 1, 2019, have different loan fees.
- Origination fees are automatically deducted at time of disbursement.
Disbursement Timing
Federal regulations require loans be disbursed in a minimum of two payments per loan period —
- Academic-year loans (fall and spring semesters)- divided into two payments over the academic year:
- 1st disbursement after loan origination in fall semester, and
- 2nd disbursement at the beginning of spring semester.
- Single-semester loans (fall or spring) – divided into two payments over the semester:
- Exact disbursement dates depend on timing of origination –
- 1st disbursement after loan origination, and
- 2nd disbursement approximate midpoint between 1st disbursement and end of semester.
- Exact disbursement dates depend on timing of origination –
Please Note the following details regarding loan disbursements:
- Students must maintain at least half-time enrollment (6 units) to receive loan disbursement.
- Loans not available during summer term.
- First time student borrowers with no prior Federal Direct Loan are required by law to complete 30 days of their program of study before receiving their first loan disbursement.
2022-2023 Direct Loan Disbursement Schedules
Direct Loan disbursements for each semester are provided on the term payment scheduled published on the WCC FA main web page.
Per HEA SEC.479(A(c),34CFR 685.301(a)(8), on a case-by-case basis, Woodland Community College Financial Aid Office may refuse to originate a loan for an individual borrower, or may originate a loan for an amount less than the borrower’s maximum eligibility. Woodland Community College reviews each student’s loan request individually. The Financial Aid Office will notify the student in writing when loan is originated and accepted by U.S. Department of Education. In the event the originated loan amount is reduced or the financial aid office refused to originate a loan, the impacted student will be notified in writing immediately.
The Financial Aid Office will review on a case-by-case basis a student’s: current loan debt, satisfactory academic progress, evaluation of time to complete, ability to repay accumulated loan debt based on an analysis of the student’s program of study and median annual earning potential after 2 years of employment in the field. The Financial Aid Office reserves the right to refuse to originate any Federal Direct Loans when a student indicates that educational loan funds will be used for purposes other than educational expenses, indication is made that the student does not intend to repay the loan, and when fraud has been detected.
Borrower’s Right To Cancel
Before a student’s loan money is disbursed, he/she may cancel all or part of their loan at any time by notifying their school. After their loan is disbursed, a student may cancel all or part of the loan within certain time frames. The promissory note and additional information received from the school will explain the procedures and time frames for canceling his/her loan.
Repayment Options
Although you may select or be assigned a repayment plan when you first begin repaying your student loan, you can change repayment plans at any time—for free.
Student borrowers can contact their loan servicer if they want to discuss repayment plan options or change your repayment plan. Student borrowers can get information about all of the federal student loans they have received and find the loan servicer for their loans by logging in to their Federal Student Aid Dashboard. The student’s FSA ID and Password are required to access the dashboard.
Types of Repayment Plans
Standard Repayment Plan: Payments are a fixed amount that ensures your loans are paid off within 10 years (within 10 to 30 years for Consolidation Loans).
Read more about the Standard Repayment Plan here.
Graduated Repayment Plan: Payments are lower at first and then increase, usually every two years, and are for an amount that will ensure your loans are paid off within 10 years (within 10 to 30 years for Consolidation Loans).
Read more about the Graduated Repayment Plan here.
Extended Repayment Plan: Payments may be fixed or graduated, and will ensure that your loans are paid off within 25 years.
Revised Pay As You Earn Repayment Plan (REPAYE): Your monthly payments will be 10 percent of discretionary income. Payments are recalculated each year and are based on your updated income and family size. You must update your income and family size each year, even if they haven’t changed. If you’re married, both your and your spouse’s income or loan debt will be considered, whether taxes are filed jointly or separately (with limited exceptions). Any outstanding balance on your loan will be forgiven if you haven’t repaid your loan in full after 20 years (if all loans were taken out for undergraduate study) or 25 years (if any loans were taken out for graduate or professional study).
Read more about Revised Pay As You Earn Repayment Plan (REPAYE).
Pay As You Earn Repayment Plan (PAYE): Your monthly payments will be 10 percent of discretionary income, but never more than you would have paid under the 10-year Standard Repayment Plan. Payments are recalculated each year and are based on your updated income and family size.
Read more about Pay As You Earn Repayment Plan (PAYE).
Income-Based Repayment Plan (IBR): Your monthly payments will be either 10 or 15 percent of discretionary income (depending on when you received your first loans), but never more than you would have paid under the 10-year Standard Repayment Plan. Payments are recalculated each year and are based on your updated income and family size. You must update your income and family size each year, even if they haven’t changed. If you’re married, your spouse’s income or loan debt will be considered only if you file a joint tax return. Any outstanding balance on your loan will be forgiven if you haven’t repaid your loan in full after 20 years or 25 years, depending on when you received your first loans. You may have to pay income tax on any amount that is forgiven.
Read more about Income-Based Repayment Plan (IBR).
Income-Contingent Repayment Plan (ICR): Your monthly payment will be the lesser of 20 percent of discretionary income, or the amount you would pay on a repayment plan with a fixed payment over 12 years, adjusted according to your income. Payments are recalculated each year and are based on your updated income, family size, and the total amount of your Direct Loans. You must update your income and family size each year, even if they haven’t changed. If you’re married, your spouse’s income or loan debt will be considered only if you file a joint tax return or you choose to repay your Direct Loans jointly with your spouse. Any outstanding balance will be forgiven if you haven’t repaid your loan in full after 25 years.
Read more about Income-Contingent Repayment Plan (ICR).
Income-Sensitive Repayment Plan: Your monthly payment is based on annual income, but your loan will be paid in full within 15 years.
Read more about Income Sensitive Repayment Plan.
Avoid Student Loan Delinquency and Default
If you’ve missed a payment or are having trouble making payments, immediately contact and discuss options with the organization that handles billing and other services for your loan to avoid defaulting on your loan.
Contact your loan servicer if you are unable to make payments.
Delinquency
The first day after you miss a student loan payment, your loan becomes past due, or delinquent. Your loan account remains delinquent until you repay the past due amount or make other arrangements, such as deferment or forbearance, or changing repayment plans.
If you are delinquent on your student loan payment for 90 days or more, your loan servicer will report the delinquency to the three major national credit bureaus. If you continue to be delinquent, your loan can risk going into default. Don’t ignore your student loan payments—defaulting on your loan can have serious consequences.
Default
If your loan continues to be delinquent, the loan may go into default. The point when a loan is considered to be in default varies depending on the type of loan you received.
For a loan made under the Direct Loan Program, you’re considered to be in default if you don’t make your scheduled student loan payments for at least 270 days.
If you defaulted on any of your federal student loans, contact the organization that notified you of the default as soon as possible so you can explain your situation fully and discuss your options. If you make repayment arrangements soon enough after your loan has gone into default, you may be able to resolve the default quickly.
Consequences of defaulting can not only impact your ability to borrow but can impact your finances as well. Consequences include the following:
- The entire unpaid balance of your loan and any interest you owe becomes immediately due (this is called “acceleration”).
- You can no longer receive deferment or forbearance, and you lose eligibility for other benefits, such as the ability to choose a repayment plan.
- You lose eligibility for additional federal student aid.
- The default is reported to credit bureaus, damaging your credit rating and affecting your ability to buy a car or house or to get a credit card.
- It may take years to reestablish a good credit record.
- You may not be able to purchase or sell assets such as real estate.
- Your tax refunds and federal benefit payments may be withheld and applied toward repayment of your defaulted loan (this is called “Treasury offset”).
- Your wages may be garnished. This means your employer may be required to withhold a portion of your pay and send it to your loan holder to repay your defaulted loan.
- Your loan holder can take you to court.
- You may be charged court costs, collection fees, attorney’s fees, and other costs associated with the collection process.