Eligibility for Direct Loan
There are often instances when the grant(s) received for students educational cost is not sufficient to cover student’s full tuition. Additionally, students have the option to obtain student loans.
The Direct Loan (DL) program provides federal loans funded by the Department of Education to eligible applicants. This type of loan is for educational expenses and requires repayment at a specified time.
MASTER PROMISSORY NOTE (MPN) for a Direct Loan
Before any money is disbursed, all students must have a signed Direct Subsidized Loan/Direct Unsubsidized Loan Master Promissory Note (MPN), the Borrower’s rights and Responsibilities statement, and the Plain Language Disclosure explain the terms of your loan(s). If the student is a first time borrower of loan(s), the student is also required to complete entrance counseling on studentloans.gov.
The Entrance Counseling will entails the following information for students:
- An explanation of the use of the Master Promissory Note (MPN)
- An emphasis to the borrower the seriousness and importance of the repayment obligation the student borrower is assuming
- A description of the likely consequences of default, including adverse credit reports, delinquent debt collection procedures under Federal law, and litigation
- The obligation of the borrower to repay the full amount of the loan regardless of whether the borrower complete program or completes within regular time for completion, is unable to obtain employment upon completion, or is otherwise dissatisfied with or does not receive the educational or other services the borrower purchased from the school
- Information about the monthly payment amounts based on
A range of student levels of indebtedness of Direct Subsidized Loan and Direct Unsubsidized Loan borrowers, or student borrowers with Direct Subsidized, Direct Unsubsidized, and Direct PLUS Loans
a range of student levels of indebtedness of Direct Subsidized Loan and Direct Unsudsidized Loan borrowers, or student borrowers with Direct Subsidized, Direct Unsubsidized, and Direct Plus Loans depending on the types of loans the borrowers has obtained; or
- The average indebtedness of other borrowers in the same program at the same school as the borrower
- To the extent practicable, provide an explanation of the effect of accepting the loans to be disbursed on the eligibility of the borrower for other form of student financial assistance
- Information on the accrual and capitalization of interest
- Borrowers of unsubsidized loans have the option of paying interest while in school
- Definition of half-time enrollment and the consequences of not maintaining half-time enrollment
- Importance of contacting appropriate offices if student withdraws prior to completion of program of study
- Sample monthly repayment amounts
- Consequences of default
- Information about the NSLDS and how the borrower can access the borrowers records
- Name and contact information for individual the borrower may contact with questions about the borrower’s rights and responsibilities or the terms and conditions of the loan
National Student Loan System (NSLDS)
Once Merryfield Academy enters into an agreement with any student, the student or parent
The financial aid administrator will also discuss the following:
Gross Loan Amount- This is the total amount of amount of the loan that you are borrowing. You will be responsible for repaying this amount.
Loan Fee Amount – This is the amount of the fee that the government will charge on your loan. It is based on the percentage of the student’s Gross Loan Amount. The percentage and calculation is shown to all students during their initial interview process where the Loan Fee(s) Amount will be subtracted from your Gross Loan Amount.
Net Loan Amount- This is the amount of your loan money that remains after the Loan Fee(s) amount is subtracted and the Interest Rebate amount is added. Merryfield will disburse the Net Loan Amount by crediting the student’s ledger or paying the student directly, depending what’s written on the student’s credit balance or authorization form.
Before the loan money is disbursed all students have the right to cancel all or part of loan(s) at any time by notifying the school.
After a student’s money is disbursed, there are two ways to cancel all or part of your loan(s).
Merryfield requires written confirmation of the types and amounts of Title IV loans that a student wants to receive for an award year before crediting loan money to your account at the school. The students can notify the financial aid office or the business office if they want to cancel all or part of their loan(s) within 14 days, after the date the school notifies the student of his or her right to cancel all or part of his or her loan.
Federal Direct Subsidized Stafford Loan (34 CFR 668.2)
The Federal Direct Stafford loan program provides loans to undergraduate and professional students attending schools that participate in the Direct Loan program. The federal government subsidizes the interest while the borrower is in an in school grace, or deferment period.
Federal Direct Unsubsidized Stafford Loan (34 CFR 668.2)
The Federal Direct Unsubsidized Stafford Loan program provides loans to undergraduate, graduate and professional students attending schools that participate in the Direct Loan program. The borrower is responsible for the interest that accrues during any period.
150% Direct Subsidized Loan Limit
On July 6, 2012, the Moving Ahead for Progress in the 21st Century Act (MAP-21) (Public Law112-141) was enacted. MAP-21 added a new provision to the Direct Loan statutory requirements (see HEA section 45(q)).
The new statutory requirements
- Limit a first-time borrower’s eligibility for Direct Subsidized Loans to a period not to exceed 150% of the length of the borrower’s educational program, and
- Under certain conditions, also cause first-time borrowers who have exceeded the 150% to lose the interest subsidy on their Direct Subsidized Loans.
- This limitation on Direct Subsidized Loan eligibility only applies to a “first-time borrower” on or after July 1, 2013. Section 6685.200(f)(1)(i). “First-time borrower” is an individual who has no outstanding balance of principal or interest on a loan type) on a loan made under the Direct Loan Program of the FFEL Program (regardless of loan type ) on July 1, 2013, or on the date the borrower obtains a Direct Loan after July 1, 2013.
- 1, 2013, or on the date the borrower obtains a Direct Loan after July 1, 2013.
- Active Confirmation – the school does not disburse the loan until the borrower affirmatively requests or accepts the proposed loan type and amount or request changes to the loan package.
- Passive Confirmation – the school does not disburse the loan until the borrower is notified of his proposed loan package and the time given to respond has elapsed. The borrower only needs to take action when wishes to decline the loan or make adjustments to the type or amount of the loan.
Merryfield Academy of Pet grooming applies a passive confirmation rule, with regards to the disbursement of loan funds. Students are not required to sign their award letter to confirm the funds. Once the funds have been posted to the students’ ledger they are given a copy of their official award letter and at that point the award letter can be signed if the student chose to sign, but no signature is required.
- Students and their parents who are in default on a student loan must resolve the default before they can become eligible to receive financial aid. Though, a parent in default on a PLUS loan does not prevent the student from obtaining aid.
- A student who unintentionally exceeds the annual or aggregate loan limit is ineligible to receive loans, but may regain eligibility by paying the extra amount borrowed or make satisfactory arrangement with the lender in the case of a default.
- A student or student’s parent(s) whose property is subject to a judgment lien for debt owed to the United States is also ineligible.
- Any student who has been convicted of, or has pled no contest or guilty to crimes involving fraud in obtaining Title IV funds is not eligible for aid and must pay all outstanding balance in full to regain financial aid eligibility.
Parents interested in borrowing through the Direct plus Loan Program should contact the Financial Aid Office of eligibility information.
PLUS (Parent loan for undergraduate student)
Parent plus Loan is a credit based loan, which allows the parent(s) of a dependent student to borrow money for student educational expenses. Interest is applied from the first disbursement until the loan is paid in full. If student tuition is not sufficient to cover his or her tuition cost, and the parent wishes to participate in the parent plus loan, the parent has the option to log on to https://studentloans.gov/myDirectLoan/index.action and complete the application for the parent plus loan. Or, the parent can give Merryfield authorization and complete the necessary documentation to run the credit check directly on COD and award the amount to cover the deficiency for his or her child’s remaining educational expenses up to the cost of attendance. Parent plus loans can be awarded up to the cost of attendance.
The October 23, 2014 regulations provide that a PLUS loan applicant (either a parent or a graduate or professional student) has an adverse credit history if, in addition to other conditions (e.g., bankruptcy, foreclosure, tax lien, or a default determination), the applicant has one or more debts that are 90 or more days delinquent or that are in collection or have been charged off during the two years preceding the date of the applicant’s credit report, but only if the total combined outstanding balance of those debts is greater than $2,085. Therefore, any other adverse credit history finding a PLUS Loan applicant whose credit check shows that the total of any debts that are 90 or more days delinquent or that have been placed in collection or charged off is $2,085 or less will not be considered to have adverse credit and therefore, will be eligible for a PLUS Loan. (Rev 3/26/2015). If the parent plus loan is denied due to adverse credit history after completing a Direct PLUS loan, the parent can initiate an Endorser Addendum electronically, or initiate the process of appealing the determination of adverse credit or indicate that he or she does not wish to continue pursuing a Direct PLUS Loan. If none of the aforementioned process worked, the dependent student will be awarded additional unsubsidized loan up to the independent student loan level for the academic year.
Additional Unsubsidized Loans
- Documented exceptional circumstances” include, but not limited to:
- The parent incarcerated;
- The parent’s whereabouts are unknown;
- The parent is not a U.S. citizen or is unable to provide evidence that he or she is in the United States for other than a temporary purpose with the intention of becoming a citizen or permanent resident;
- The student’s parent receives only public assistance or disability benefits, and the school has documented that the parent would not be able to repay the PLUS Loan;
- The parent has filed for bankruptcy and has provided documentation from bankruptcy court stating that as a condition of the bankruptcy filing, the parent may not incur any additional debt; or
- Once Merryfield has examined the family financial information and documented the parent’s likely inability to repay the PLUS Loan due to an existing debt burden or the parent’s expected income-to-debt ratio then adjustments can be made for the student to receive additional subsidized loans.
Parents interested in borrowing through the Direct plus Loan Program should contact the Financial Aid Office of eligibility information.
Annual Loan Limits
Annual Limit for Sub/Unsub Loans Subsidized Total (Subsidized&
Dependent undergraduates (excluding dependent students whose parents can’t get PLUS)
First Year……………………………………… $3, 500sub /$2,000unsub…………………………………………. $5, 500
Second Year…………………………………… $4, 500su b/$2,000unsub……………………………………….. $6, 500
Third Year and Beyond…………………………..$5,500 500sub/$2,000unsub…………………………………$12,500
Independent Undergraduate and Dependent Students whose parents can’t get PLUS
First Year………………………………………..$3, 500sub/$6000unsub….. $9, 500
Second Year……………………………………$4, 500sub/$6000 unsub…. $10, 500
Third Year and Beyond………………………..$5, 500sub/$7000unsub…….$12, 500
Aggregate Limit for Sub/Unsub Loans Subsidized Total (Subsidized&
Dependent Undergraduate (excluding those
Whose parents can’t borrow PLUS)………. $23, 000/$8000.00…………$31, 000
Independent Undergraduate and Dependent
Students whose parents can’t get PLUS……. $23, 000/$34,5000………..$57, 500
In the case of first-year first time borrower, there is a 30 day window prior to disbursing funds, but may be waive if the schools cohort default rate meets the waiver requirement.
Merryfield Academy is an attendance taking institution that offers training in clock-hours. For the purpose of financial aid, Merryfield is defined as a Clock hour school. For the purpose of awarding the Borrower Based Academic Year is used, which is defined as a minimum of 600 Clock Hours and 40 weeks of instructional time.
Loan Origination Checklist
For all Stafford and PLUS loan borrowers, Merryfield first confirms that everyone meets the definition of eligible borrower, which includes:
- Determine that the student is enrolled at least half-time and meeting satisfactory academic progress
- Review NSLDS information to ensure that student is not in default, does not owe and overpayment on FSA grant or loan and has not exceed the annual or aggregate loan limits
- Ensure that total loan in combination with other aid, will not exceed the student’s financial need
- Guarantee that loan disbursement dates meet cash management and disbursement requirements
For Stafford loan:
- Determine the student’s Pell Grant eligibility and if eligible, include the grant in the student’s aid package
- Before offering an unsubsidized Stafford loan, first determine that student’s eligibility for a subsidized Stafford loan
- Prorate the Stafford annual loan limit for an undergraduate enrolled in a program or remaining period of study that is shorter than an academic year
Effect of Loan Status on Student Aid Eligibility
|In school grace period
ID-In school or grace period
DP-Default, then paid in full
PC-Paid in full thru consolidation
PF-Paid in full
Does not matter what type of consolidation loan the borrower received, nor whether loan was in default before
It does not matter is the loan was in default
|Cancelled or discharged
BC-No default, bankruptcy discharge
DF-Default, false certification discharge
DG-Default, false certification (ability to benefit) discharge
DJ-Default, discharged by judicial ruling
DK-Default, bankruptcy discharge
DN-Default, closed school discharge
DS- Default, disability cancellation
EA-False certification (ability to benefit) discharge
EC-Closed school discharge
EF-Loan discharged for fraudulent disbursement
EJ-Court ordered write-off
OD-Default, bankruptcy discharge
To receive new loans, the borrower must have a doctor’s certification that his or her condition has improved and sign statement indicating that he or she is aware that the new loan cannot be cancelled on the basis of any present impairment unless the condition deteriorates
|No default, bankruptcy filing
|BK-No prior default, active bankruptcy claim
Loan was not in default and has not been discharged
DL-Defaulted in litigation
DT-Defaulted, collection terminated
|Default bankruptcy filing
DB-Defaulted, active bankruptcy claim
DO-Defaulted, active bankruptcy claim
|No, Unless debtor can show that loan is dischargeable
Compromise is recognized as payment in full
|No, unless debtor reaffirms loan and makes satisfactory repayments or repay loan in full
|Default, satisfactory repayment arrangement
|DX-Defaulted, satisfactory arrangements, and nine consecutive payments
|Yes, if borrower continues to comply with repayment plan or is granted forbearance