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Before you Borrow
  • Choosing to borrow an educational loan is a decision that you should consider seriously before entering into a loan agreement.
  • Loans can be a wonderful way to make attending college possible, but many students enter into loan agreements without fully understanding the consequences of their decisions.
  • 1. Is a federal loan best for me?

    . Federal loans, including Stafford loans, PLUS loans, and Perkins loans, are generally the best options and should be your first consideration.

    . The maximum interest rates and fees on these loans are set by federal law, so the terms and conditions for these loans are clearly defined and will not change over time.

    . Private loans, also known as alternative loans, offer another type of loan.

    . Sometimes students choose to borrow private loans because they believe it's a simpler option. (You don't have to fill out a FAFSA in order to borrow, the funds are sometimes sent directly to you, and our office may not even have to certify the loan).

    . You will pay a price for that convenience - in the form of very high interest rates and high loan fees.

    . Often, students commit to these loans without even knowing the interest rates or repayment terms.

    . Before you apply for a loan that you don't fully understand, contact our staff to see if there might be better options for you.

    2. How much should I borrow?

    • You should never borrow more than you absolutely need to attend school.
    • Loans certified by the financial aid staff cannot exceed the estimated cost of attendance figures used for all students for financial aid purposes (many students find they can live less expensively than their estimated cost of attendance).
    • Look carefully at your spending habits to see if there are things you can do to save money ( look for ways to save on books and supplies and if you're living off-campus, are there less expensive housing options that you could consider?).
    • Look for free & inexpensive activities you can do on campus and in the city.
    • Loans must be repaid when you're no longer enrolled in school, and you need to be very honest about your ability to repay student loan debt based on what you anticipate your future annual income will be.

    Stafford Loan Resources

    1. Federal Subsidized Stafford Loans

    • There are two types of Federal Stafford Loans, subsidized and unsubsidized.
    . Federal Subsidized Stafford Loans are given on the basis of financial need.
    . Financial need is determined by subtracting the Estimated Family Contribution (EFC), provided from the FAFSA, from the cost of attendance. If your financial need is not fully met through other forms of aid (including grants and scholarships), you are eligible for Subsidized Stafford Loan funds up to the remaining amount of your financial need or up to the loan limits based on your grade level, whichever amount is lower. The Federal Government will pay interest on a Subsidized Stafford Loan while you are in school and during your six-month grace period.

    2. Federal Unsubsidized Stafford Loans

    . If you do not demonstrate financial need or if your need is fully met by other aid funds, and your full cost of attendance is not met by your other aid, you are eligible for a Federal Unsubsidized Stafford Loan. If you accept the Unsubsidized Stafford Loan you will be responsible for paying the interest while in school or you may choose to let the interest accrue.

    Loan Limits
    Year in  School
    2009-2010 Academic Year Loan Limit
    Freshmen $3,500
    Sophomore $4,500
    Junior $5,500
    Senior $5,500
    Graduate $20,500
    • Independent students and dependent students (whose parents were denied for a PLUS loan) are eligible for additional funding through the Federal Unsubsidized Stafford Loan program. Contact your Financial Aid Counselor for more information.

    3. Choosing a Federal Stafford Lender

    . Shaw University believes that students and parents want some guidance in choosing lenders from whom to borrow Federal Stafford and Federal PLUS Loans.

    . Selecting a lender is an important decision, and many students and parents have questions about how to choose a lender.

    . The university annually compiles a list of lenders who have a proven track record of providing the best loan benefits to students and best customer services to students, parents and schools.

    . Shaw University is prohibited by federal law from selecting a lender for you or recommending a specific lender for you to choose. We can, however, share with you a list of reommended lenders from whom Shaw students can choose to borrow.

    . You may choose a lender from the list below, or select a different lender if you prefer.

    . The basic terms of the loan (amount you may borrow, interest rate, length of time to repay the loan) will be the same regardless of the lender you choose.

    . Lenders may, however, offer incentives to students that reduce the cost of the loan to you up front, such as by offering you a reduced loan origination fee, or lenders may reduce the cost to you in repayment, such as by offering a reduction in the interest rate you must pay after you make a certain number of on-time payments.

    . We encourage you to choose a lender who offers the best combination of borrower benefits to meet your specific needs and/or interests.

    • No origination fee
    • 1.5% interest rate reduction for making payments by automatic draft and selecting electronic payments
    • Waiver of 1% Federal default fee
    • 1.5% interest rate reduction for making payments by automatic draft and selecting electronic payments
    • 1% origination fee
    • 1% Default fee
    • Borrowers receive a 0.25 percentage point interest rate reduction for automatic debit from their checking or savings account.
    • No origination fee
    • Lower your interest rate by 0.25% when you choose to have your payments automatically deducted from your personal bank account
    • 0.5% origination fee
    • 1% Default fee
    • .25% interest rate reduction for direct debit payments from any checking or savings account
    • 1% origination fee
    • 1% Default fee
    • Lower your interest rate by 0.25% when you choose to have your payments automatically deducted from your personal bank account

    university is guided by the following basic principles when selecting lenders to be included on the university's preferred lender list:

    1. The lender must offer a no-fee loan or lowest fee loan permitted by federal regulation to borrowers

    2. The lender has a proven track record of providing quality customer services both to the borrower and to the institution

    3. The lender accepts (except CFI) Opennet certifications through Open Net.

    4. The lender has a proven track record of servicing loans in repayment, thus reducing the incidence of borrower default

    Federal Parent Loan for Undergraduate Students (PLUS)

    Federal PLUS loans are for parents of dependent students enrolled in college. This loan provides additional funds for educational expenses. It allows a creditworthy parent or stepparent of dependent undergraduates to borrow up to the cost of attendance minus any other financial aid received. These loans are available through commercial lenders and are based on a borrower's credit history rather than financial need. The five lenders identified above (CFI, Inc., Sallie Mae, Key, Regions, and Sun Trust Banks) process PLUS loans for Shaw students. The interest rate on PLUS loans will be a fixed 8.5%. A 3% origination fee is deducted and an insurance fee of up to 1% may be deducted from the loan proceeds by the lender. PLUS loans do not require the FAFSA but it is strongly recommended that you complete it in order to be considered for other aid. Students and the parent borrowers must be U.S. citizens or permanent resident aliens and must not have an unresolved default or overpayment owed on Title IV educational loans or grants.

    Repayment begins 60 days after final disbursement of the loan. The repayment term is generally based on a ten-year plan. Parents may pre-pay their loans in whole or part without penalty. Under certain circumstances, parents may consolidate their federal PLUS loans.

    Master Promissory Note

  • The MPN is a legal document. By signing it, you promise to repay your PLUS Loans.
  • Your MPN is valid for 10 years from the date you sign it if a first disbursement on the note is made within one year of signing.
  • Changing a loan amount

    A parent may choose to reduce or cancel the PLUS loan by

  • Accepting a lower amount than offered
  • Reducing it when the loan is approved
  • Requesting a return of funds to the lender within fourteen days of the time the funds are disbursed to the student's account if the student has not received a refund of a credit balance.
  • A request to change the loan should be made directly to the Office of Financial Aid in writing as soon as possible.

  • Disbursements
    By federal regulations these loans are required to have two disbursements, one at the start of the loan period and one at the midpoint.


    Accepting a PLUS Loan

    All PLUS borrowers must receive a pre-approval from a lender before the aid office will certify the loan. The lender will notify the aid office of your pre-approval status.
    If you have borrowed a PLUS previously, the lender will use the same MPN if you remain with the same lender. If your lender is not on the list, contact your lender directly.
    If you are a new borrower, you will be lead through the following steps:
    Review the lender benefits and incentives. Choose a lender. It is important to choose wisely; most parents have an account with their lenders for a minimum of 10 years; it is critical to remember your lender for subsequent years.
    Complete a Pre-Approval Application and a Master Promissory Note.

    Alternative/Private Loans

    A number of major lenders offer credit-worthy students and /or their parents the opportunity to borrow privately in order to meet educational costs not covered by their financial aid awards. In most cases a credit worthy co-signer is required unless the student has significant income. Some require a minimum of half-time enrollment and some require satisfactory academic progress. Families are encouraged to carefully review and consider the terms of any private loans prior to applying. It is important to remain with the same lender throughout your education, if possible. Shaw University requires that you receive pre-approval and complete the promissory note before the Financial Aid Office will certify your alternative loan. The Financial Aid Office will receive confirmation directly from the lender when you have been credit-approved. Again, all of the lenders listed above process alternative loans for credit worthy borrowers at Shaw University.

    Federal Perkins Loan (Formerly the National Direct/Defense Student Loan - NDSL)

    The Federal Perkins Loan is a federal loan administered by Shaw University to provide long-term (maximum ten-year repayment plan), low interest (5%) loan funds for education expenses to students with "exceptional financial need." No interest or repayment is required while the student is enrolled at least half-time in undergraduate or graduate school. Under this program, students may borrow up to $4,000 per year to finance their educational expenses. Loans generally range from $500 to $4,000 per year. Due to extremely limited funding, these federal loans are awarded to students with exceptional circumstance and need. Graduate/professional students may receive up to $4,000 per year to a maximum of $40,000 (including any Perkins money borrowed at the undergraduate level). The total amount borrowed cannot exceed $20,000 for undergraduate students. Repayment begins nine months after graduation or after the student ceases to be enrolled on at least a half-time basis.

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