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Federal Stafford Loans

Description
Federal Stafford loans are low interest loans offered by the U.S. Department of Education to help cover some of the immediate costs associated with graduate or undergraduate programs. Loans must be repaid including interest.   Stafford loans come in two forms, subsidized and unsubsidized, of which subsidized portions have slightly better terms.   Undergraduate students are subject to annual loan limits that range from $5,500 to $12,500 per year, and graduate students are subject to annual loan limits of $20,500 per year.

Forms and Procedures to Apply
To apply for the Federal Stafford loans, students must:

  • Apply to and be accepted to McPherson College
  • Submit a Free Application for Federal Student Aid (FAFSA) and receive a result known as the Expected Family Contribution (EFC).   The FAFSA is available at studentaid.gov/h/apply-for-aid/fafsa .   Students should make sure to include McPherson College’s FAFSA code 001933.
  • Complete Entrance Counseling and a Master Promissory Note (MPN) at studentloans.gov

Eligibility Requirements
To be eligible for Federal Stafford loans at McPherson College, students must:

  • Meet the general eligibility requirements as stated within the “Eligibility for Federal Student Financial Aid” section of the Consumer Information Page
  • Submitted all forms for application
  • Be in good standing on previous educational loans

Criteria for recipient selection
To be considered for a Federal subsidized Stafford loan, students must:

  • Be enrolled at least half time in an undergraduate degree program
  • Show financial need after other forms of financial aid have been considered.

To be considered for a Federal unsubsidized Stafford loan, students must:

  • Be enrolled at least half time in an undergraduate or graduate degree program
  • Have exhausted all subsidized Stafford loan eligibility

Criteria for award amount
The actual award amount in any given year will be determined by the following:

  • Need – Need for Stafford loans is determined with the following formula:
    Cost of Attendance – EFC – Other aid awards = Need.
  • Dependency Status – Independent students are automatically eligible for an additional unsubsidized loan amount each year.   Dependent students must first have a parent that is unable to obtain a PLUS loan to be eligible for the same unsubsidized loan limits. The chart below outlines how the dependency status affects the loan amounts.
  • Annual Loan limits – Annual Loan Limits are the maximum amounts of loan funds that a student may receive during a given academic year.   Students that are at least half-time may borrow up to the full annual loan limit. Students that are less than full-time and borrow the full annual loan limit are more likely to reach their aggregate loan limit (described below) before finishing their degree. The chart below outlines the annual loan limits in the Stafford loan program.
  • Aggregate Loan limits – Aggregate Loan Limits are the maximum amount of loan funds that can be borrowed at any given time.   The chart below outlines the Aggregate loan limits in the Stafford loan program.
  • Last Period of Enrollment – Students that are known to be finishing their program and are in a period of enrollment that is less than an academic year are subject to loan proration.   This process will provide a prorated annual loan limit that is based the number of credits left as compared to the minimum number of credits in the academic year.
  • Degree Program – Students in graduate programs have different loan eligibility than undergraduate students.  The chart below outlines how the degree program affects subsidized and unsubsidized loan amounts.
Year/Program LevelDependent StudentIndependent Student or Dependent Student whose parent could not obtain a PLUS loan
Freshmen Undergraduate annual loan limit$5,500 – No more than $3,500 of this can be subsidized$9,500 – No more than $3,500 of this can be subsidized
Sophomore Undergraduate annual limit$6,500 – No more than $4,500 of this can be subsidized$10,500 – No more than $4,500 of this can be subsidized
Junior and Beyond Undergraduate annual loan limit$7,500 – No more than $5,500 of this can be subsidized$12,500 – No more than $5,500 of this can be subsidized
Graduate Student annual loan limitN/A – All graduate students are considered independent$20,500 – unsubsidized only
Undergraduate Aggregate Loan limits$31,000 – No more than $23,000 of this can be subsidized$57,500 – No more than $23,000 of this can be subsidized
Graduated Aggregate Loan limitsN/A – All graduate students are considered independent$138,500 – No more than $65,500 of this can be subsidized.   This includes all undergraduate loans.

Terms and Conditions
Recipients of Federal Stafford loans agree to the following terms and conditions:

  • Students must accept loan amounts through Bulldog Connect or by Financial Aid Notification
  • Students must pay back their student loans, plus any accrued interest even if:
    • The student does not finish their degree
    • The student cannot find employment
    • The student is dissatisfied with their program of study

Students that do not pay back their loans may go into default which can result in a negative result on credit scores, loss of future deferment eligibility, loss of eligibility for additional federal grants and loans, and garnishment of wages, tax returns and social security benefits.

  • Interest is fixed each year, however, the rate may change from year to year
    • 2021-22 Interest Rate Undergraduate – 3.73%
    • 2021-22 Interest Rate Graduate – 5.28%
  • Students are not required to repay any interest or principle amounts while they are attending at least half time in an eligible degree program, or for 6 months after ceasing enrollment or going below half time status
    • The time that a student is not required to repay principle or accrued interest due to at least half time enrollment is called In-School Deferment
    • The 6 month timeframe after a student ceases to be enrolled or attends less than half time is called the Grace Period. Each loan has only one grace period.   Students that attend in non-consecutive terms may go directly into repayment on previous loans that have already exhausted their grace period.
  • Interest accrues on Federal Stafford loans at the point of disbursement, however, borrowers with subsidized Stafford loans are not responsible for certain portions of interest
    • Interest accrued on subsidized Stafford loans during In-School Deferment, grace periods, or any other type of deferment are the responsibility of the Department of Education (with the exception of subsidy loss as explained below).   Borrowers are responsible for interest that accrues on subsidized Stafford loans at all other times.
    • Interest accrued on unsubsidized Stafford loans will be the responsibility of the borrower from the point of disbursement until paid in full
  • Federal Stafford loan disbursements are subject to origination fees. Origination fees are deducted from the gross disbursement and are determined by when the loan was first disbursed.
    • October 1, 2021 – September 20, 2022 – 1.057%

Students are responsible to repay the gross loan disbursement.

  • New borrowers must complete entrance counseling and a Master Promissory Note.
  • Student loans are reported to the National Student Loan Data System, for which borrowers may monitor their loan portfolio.   This information will also be accessible by lenders, servicers, guarantee agencies, and schools determined to be authorized users of the data system.
  • Students will be sent a disbursement notification from McPherson College detailing a number of loan details.   Students have a right to cancel their loans within 14 days of their disbursement notification.
  • Borrowers that graduate, withdraw, or begin attendance less than half time will be provided with exit counseling information.   Exit counseling reminds borrowers of their rights and responsibilities.   Information that may be collected during this process includes: name, address, telephone number, employer, if known, and 2 references with contact information.

Repayment Schedules
Prospective student borrowers may wish to estimate monthly repayment amounts.   The following chart is provided for estimate purposes only.

Sample Repayment Schedule including Estimated Interest
Based on Standard 10 year repayment plan

4.29%5.00%5.84%6.84%
Loan AmountMinimum PaymentTotal InterestPrinciple plus InterestMinimum PaymentTotal InterestPrinciple plus InterestMinimum PaymentTotal InterestPrinciple plus InterestMinimum PaymentTotal InterestPrinciple plus Interest
$1,000*$50$40$1,040$50$47$1,047$50$55$1,055$50$65$1,065
$5,500$57$1,274$6,774$59$1,501$7,001$61$1,775$7,275$64$2,109$7,609
$10,000$103$2,316$12,316$107$2,728$12,728$111$3,227$13,227$116$3,835$13,835
$15,000$154$3,474$18,474$160$4,092$19,092$165$4,840$19,840$173$5,752$20,752
$20,000$206$4,631$24,631$213$5,456$25,456$221$6,453$26,453$231$7,669$27,669
$30,000$308$6,947$36,947$319$8,184$38,184$331$9,679$39,679$346$11,503$41,503
$40,000$411$9,262$49,262$425$10,912$50,912$441$12,905$52,905$462$15,338$55,338
$50,000$514$11,578$61,578$531$13,640$63,640$552$16,132$66,132$577$19,172$69,172
* At the minimum payment of $50 per month, this amount will be paid in 21-22 months

Current student borrowers may be able to estimate monthly payment amounts using actual borrowed loan figures at studentloans.gov. To use this site:

  • Go to studentloans.gov
  • Log in using your FSA ID for best results, or
  • Select Managing Repayment without logging in to find a number of helpful tools relating to loan repayment including a repayment calculator.

Repayment Plans
All student loans are set to a 10 year standard repayment plan.   Borrowers may be eligible for other types of repayment plans.   Repayment plans outside of the standard often result in additional years of repayment and more interest paid over the life of the loan.   These plans however, may prevent borrowers from going into default by offering lower monthly payments.   To view a synopsis of other repayment plans, students should:

  • Go to studentloans.gov
  • Hover over the tab entitled “How to Repay your Loans” until a drop down menu appears
  • In the dropdown menu, hover over “Understanding Repayment” until a secondary dropdown appears
  • In the secondary dropdown, select “Repayment Plans”

Criteria for continued eligibility
To continue receiving federal Stafford loans, students must:

  • Meet the Satisfactory Academic Progress requirements as explained in the college catalog each semester.
  • Submit a new FAFSA each year.