All loans, including student loans, represent debt that must be repaid; however, most student loans do not go into repayment until after the student graduates or drops below half-time enrollment (6 credits). In addition to delayed repayment, most student loans have:
- relatively low interest rates
- several repayment options from which to choose
- circumstances under which repayment may be postponed
- other favorable terms and conditions
Loans may be thought of as an investment in the student's future as long as the borrower is prepared to meet the repayment responsibilities. Failure to repay loans will have serious adverse consequences. When borrowing, it is important to:
- carefully plan and budget so that the amount borrowed is only what is needed to cover essentials
- keep track of how much is borrowed each year
- have an idea as to how the amount borrowed will be repaid when the time comes
Please refer to the links below for more detailed information about the different types of loans:
Note: Direct Loans must be accepted in PRISM before the end of the student's enrollment and associated loan period. If received afterward, the loan cannot be processed.
Direct Loan Glossary
Direct Loan Program: The William D. Ford Federal Direct Loan Program, also known as Direct Loans, provides loans to student and parent borrowers directly through the U.S. Department of Education rather than through a bank or other lender.
Direct Loan Entrance Counseling: Before receiving a student loan, all borrowers must complete a Loan Entrance Counseling session. This quick and easy interactive counseling session provides useful tips and tools to help students develop a budget for managing educational expenses and understand loan responsibilities.
Direct Loan Master Promissory Note (MPN): A legally-binding contract between the borrower and the U.S. Department of Education. The promissory note contains the terms and conditions of the loan, including how and when the loan must be repaid.
Direct Subsidized Loan: Also referred to as Federal Direct Subsidized Loan. It is a loan from the U.S. Department of Education made on the basis of the student's financial need and other specific eligibility requirements. The federal government does not charge interest on these loans while borrowers are enrolled at least half-time (6 credits), during the six-month grace period prior to repayment, or during authorized periods of deferment.
Direct Unsubsidized Loan: Also referred to as Federal Direct Unsubsidized Loan. It is a federally-financed student loan made to students meeting specific eligibility requirements. Interest is charged throughout the life of the loan. The borrower may pay the interest on the loan while in school or allow the interest to be capitalized (added to the loan principal). Capitalizing the interest will increase the amount repaid over the life of the loan.
Direct Parent PLUS Loan: A Federal Direct Parent PLUS Loan is available to the parent of a Dependent aid applicant. The parent is the borrower and is responsible for repaying the loan. These loans are available regardless of financial need and the amount of eligibility depends on the total cost of education and other aid received. The parent applicant will be subjected to a credit check as part of the application process.
For more loan glossary items, visit the U.S. Department of Education Glossary.