Student Loan Information
Frequently Asked Loan Questions
What is a student loan?
A student loan is money you borrow for educational purposes that you must pay back with interest. The specific sum of money you borrow is called the principal. Interest is a percentage of the principal which you pay as a fee for borrowing. When it comes time to pay back the principal and interest you usually pay in monthly installments. If you fail to repay (or default) the government may penalize you.
What kind of loans are available?
All qualified financial aid students may borrow through the Federal Family Education Loan Program (FFELP which includes the Federal Stafford loan and the Federal PLUS loan). Federal Stafford Loans allow the student to borrow money from a private lender to help pay for education costs. Under this program, the lender will make a loan directly to you through the school. The Federal Stafford Loan Program includes Subsidized loans and Unsubsidized loans.
What is the difference between the two types of Federal Stafford loans?
- A subsidized Federal Stafford Loan is based on financial need. "Need" is determined by subtracting the Expected Family Contribution (determined by federal formula) and all other forms of aid from the Cost of Attendance (COA). The federal government pays the interest for you while you are enrolled in school at least half time; during the six-month grace period after you stop attending school at least half-time; and during periods of authorized deferment.
- An unsubsidized Federal Stafford Loan is not based on financial need and is available to you regardless of income. Because this loan is not subsidized by the government,you are responsible for all interest which accrues during in-school, grace and deferment periods. You may choose to make periodic interest payments to the lender or opt to have the accrued interest capitalized (added on to) the principle loan amount.
| Subsidized Stafford Loan Calculation | Unsubsidized Stafford Loan Calculation |
|---|---|
| Cost of Attendance minus Expected Family Contribution (EFC) minus Other Financial Aid (grants, scholarships, VA, work-study, etc.) equals Subsidized Loan Amount (up to loan maximum) |
Cost of Attendance minus Other Financial Aid (grants, scholarships, VA, work-study, etc.) minus Subsidized Stafford Loan equals Unsubsidized Loan Eligibility (up to loan maximum) |
How do I apply for a student loan?
You must have a completed financial aid file. After your financial aid eligibility has been determined, ask for a loan request form at the Butte College Financial Aid Office.
Contact the Financial Aid Office for specific deadline dates regarding loan request submission.
What kinds of problems could cause my loan process to be held-up?
- Default status - Students who are in default on a student loan or owe a repayment to any Title IV financial aid program are not eligible to apply for student loans.
- Non-Degree Status - Students must be enrolled at Butte College in a degree or certificate program to be eligible to apply for student loans.
- Enrolled less than half-time (6 units) - Students must be enrolled in and attending Butte College at least half-time (6 units) for the entire loan term.
Incarcerated Students
A student is considered to be incarcerated if she is serving a criminal sentence in a federal, state, or local penitentiary, prison, jail, reformatory, work farm, or similar correctional institution (whether it is operated by the government or a contractor). A student is not considered to be incarcerated if she is in a half-way house or home detention or is sentenced to serve only weekends.
Incarcerated students are not eligible for Federal student loans but are eligible for FSEOGs and FWS and are also eligible for PELL grants if not incarcerated in a federal or state penal institution.
Lack of Satisfactory Academic Progress
Official academic transcripts from all previous accredited colleges must be received, evaluated, and posted by Butte College Admissions and Records Office.
What is the interest rate?
For loans made on or after July 1, 2006 the interest rate is fixed at 6.8%. The interest rate for loans made between October 1, 1998 and June 30, 2006 is variable capped at 8.25%.
Are there any other costs associated with these loans?
There are two fees associated with receiving subsidized and unsubsidized Federal Stafford loans. The first, an origination fee, is paid to the federal government and currently equals 1.5 % of the loan amount. The second, a default fee of 1 %, must also be paid. However, certain lenders may waive all, or a portion, of these fees. Your disclosure statement lists the amount you will receive after the fees are assessed. You will still be required to repay the total amount of the loan.
Am I eligible for these loans?
To be eligible for these loans you must:
- Have a completed Financial Aid file including determination of Pell Grant eligibility.
- Complete and return a valid Master Promissory note
- Be enrolled in a degree program or certificate program
- Be attending at least half-time for the entire loan period
- Not be in default on any type of student loan
- Not owe a repayment on a federal student grant
- Be in compliance with the College's Satisfactory Academic Progress requirements
- In order to maintain continued eligibility to borrow, you must also complete at least six units during each semester that you receive loan funds
- Complete Entrance Loan Counseling
- Have official academic transcripts from all prior accredited college/universities evaluated by the Butte College Admissions and Records Office.
How do I complete a Promissory Note?
You must complete all items in the borrower information section of the promissory note (references, drivers license number, etc.) and sign the promissory note in ink. Some lenders allow MPN's to completed electronically.
How much can I borrow?
How much you can borrow each year depends on your cost of attendance, other financial aid received, and grade level. However, the maximum amount for a grade level 1 student is $3,500. The grade level 2 maximum is $4,500. See the Financial Aid Office for details on grade level definition.
| Stafford Loan Maximums | ||
Annual Limits (effective July 1, 2007 ) |
||
Maximum amounts for each year of study |
||
| Type of student | Subsidized | Subsidized and unsubsidized |
Dependent undergraduates |
||
| First Year (29 units completed) | $3,500 | $3,500 |
| Second year (30+ units completed) | $4,500 | $4,500 |
Independent undergraduates* (and dependents whose parents are unable to borrow under the PLUS program) |
||
| First Year (29 units completed) | $3,500 | $7,500 |
| Second year (30+ units completed) | $4,500 | $8,500 |
Aggregate limits + |
||
Maximum amounts over academic career |
||
Dependent undergraduates |
23,000 | 23,000 |
Independent undergraduates* (and dependents whose parents are unable to borrow under the PLUS program) |
23,000 | 46,000 |
*Independent students may be eligible for an additional $4,000 in unsubsidized loan(s). You are an independent student if you were not required to provide parental information when completing the Free Application for Federal Student Aid or Renewal Free application for Federal Student Aid.
+Annual loan limits increased as of July 1, 2007. However, the cumulative (or aggregate) loan limits have not increased. Please review your aggregate loan totals online @ www.nslds.ed.gov (you will need your Federal Student Aid pin number to access this site). Therefore, if you borrow the annual maximum every year, you may reach the aggregate limit before you have completed your educational goal. The site may not yet include your most recent loan.
How is the money disbursed?
Your loan funds are sent in multiple disbursements, and are mailed to you. One disbursement is usually made at the beginning of each semester. If the loan is for one semester, federal regulations require two disbursements to be made, usually at the beginning of the semester and half way through the semester. If you are a first time borrower (with less than 30 completed units), your first disbursement will be 31 days after your initial semester starts.
What is Loan Entrance Counseling?
Loan counseling is a federal requirement during which all aspects of loan borrowing will be explained to you. If you are a first time borrower at Butte College, you must complete entrance counseling @ http://mapping-your-future.org
What if I have other student loans?
You will continue to receive information from your lenders about your previous student loans. BCC will provide enrollment information to your lenders to maintain your in-school status while you are in school (you need to be enrolled for at least six units).
Who can apply for PLUS Loans?
PLUS loans can be taken out by parents of dependent, undergraduate students enrolled at least half-time. You must have a complete financial aid file prior to your parent applying for the PLUS loan. Credit checks are done by the lenders on parents applying for PLUS loans. Repayment of the principal and interest begins within 60 days after the loan has been disbursed. Your parent must meet citizenship requirements and cannot be in default or owe a refund on any Title IV program. Your official academic transcripts from all prior colleges must be evaluated by the Butte College Admissions and Records Office.
How do my parents apply for a PLUS loan?
After you have completed your financial aid file and your official academic transcripts from prior colleges have been sent to the Butte College Admissions Office, your parent may apply for a PLUS loan (see preferred lender list). Your parent should contact the lender of their choice (a telephone call is acceptable) to initiate a PLUS loan.
How much can my parents borrow?
Parents may borrow up to the cost of education minus all other aid received. For example, if your cost of attendance is $6000 and you receive $4000 in other financial aid, you parents could borrow up to $2000.
How is my parent's PLUS loan disbursed?
PLUS loans are disbursed in multiple disbursements directly to Butte College. The PLUS loan will be sent to the Butte College business office. The business office will endorse the loan check and send it to your parent. You must be enrolled (and attending classes) at least half-time (6 units) for the entire loan period.
What is the interest rate?
For PLUS loans made on or after July 1, 2006 the interest rate is fixed at 8.5%.
Glossary of Loan Terms
Capitalization: The practice of adding unpaid interest charges to the principal balance of an educational loan, thereby increasing the size of the loan. Interest is then charged on the new balance, including both the unpaid principal and the accrued interest. Capitalizing the interest increases the monthly payment and the amount of money you will eventually have to repay. If you can afford to pay the interest as it accrues, you are better off not capitalizing it.
Cost of Attendance: The cost of attendance (COA), also known as the cost of education or "budget", is the total annual amount it should cost you to go to school. This amount includes tuition and fees, room and board, and allowances for books and supplies, transportation, and personal and incidental expenses. Butte College has different standard budget amounts for students living off-campus, with parents, and in-state or out-of-state.
Default: Failure to repay a loan according to the terms of the promissory note. A loan is in default when the borrower fails to pay several regular installments on time (i.e., payments overdue by 270 days) or otherwise fails to meet the terms and conditions of the loan.
- Note: if you are in default, you may want to check out the
Department of Education's Default web page.
Deferment: Deferment occurs when a borrower is allowed to postpone repaying the loan. If you have a subsidized loan, the federal government pays the interest charges during the deferment period. If you have an unsubsidized loan, you are responsible for the interest that accrues during the deferment period. You can still postpone paying the interest charges by capitalizing the interest, which increases the size of the loan. Most federal loan programs allow students to defer their loans while they are in school at least half time. If you don't qualify for a deferment, you may be able to get a Forbearance. You can't get a deferment if your loan is in default.
Delinquent:. Any loan that is 59 days or less delinquent is reported to the credit bureaus as current. Any loan that is 59 or more days delinquent is reported as delinquent. Loans that are 270 days (or more) delinquent are considered to be in default.
Federal Default Fee: A fee paid to the Federal Reserve Fund to help offset the costs of defaulted loans.
First time borrower: A student who has not successfully completed the first year of a program of study in which he or she is currently enrolled and who has not previously received a Federal Stafford loan.
Forbearance: A borrower who is willing but unable to make payments, and who does not qualify for a deferment, may request a forbearance from the lender. Forbearance allows temporary cessation of payments or smaller payments for a specific length of time. The lender may grant forbearance of principal, interest or both. The borrower is always responsible for repayment of accrued interest charges. The borrower can make interest only-payments, or the interest will be capitalized (added on to the principal).You can't receive a forbearance if your loan is in default.
Grace Period: The grace period is a short time period after graduation during which the borrower is not required to begin repaying his or her student loans. The grace period will also kick in if the borrower leaves school for a reason other than graduation or drops below half-time enrollment. The grace period is for six months. If you return to an approved school during the six month grace period and attend at least halftime, your entire grace period is reinstated.
Guarantee Agency: The guarantee agency (sometimes called the guarantor) oversees the student loan process, including the approval of the loan, and the issuance of a guarantee to the lender that the student loan will be repaid if the borrower defaults (does not repay the loan). A guarantee agency also provides public information about student loans, keeps permanent records of all loans made through it, enforces state and federal rules, and collects on defaulted loans.
Loan Consolidation: An entirely new loan combining the repayment of two or more student loans, reducing the amount of monthly payments and extending the loan term.
Master Promissory Note: The loan application. A legally binding document, signed by the borrower, listing the terms and conditions of borrowing and repayment of the loan.
Origination Fee: A fee paid to the federal government to help run the Federal Stafford loan programs.
PLUS Loans: Federal loans made by commercial institutions that are designed to help parents meet the cost of a college education for their dependents.