An education loan is a type of financial aid that must be repaid with interest. Education loans consist of three basic types: student loans, parent loans, and private loans.
Responsibility for financing a college education rests primarily with the student. Therefore, students who choose to take out loans must understand that acceptance of a loan includes the responsibility of full, timely repayment. Defaulting on a loan adversely affects both a student’s financial aid eligibility and his/her credit history.
The Federal Direct Loan Program allows for eligible students to borrow funds to help cover costs for undergraduate study. The interest rate for a direct loan first disbursed on or after July 1, 2018 and before June 30, 2019 is 5.045%. Federal direct loans have an origination fee of 1.066% assessed by the U.S. Department of Education and deducted from each loan disbursement.
Subsidized loans are only available to undergraduate students who demonstrate federal financial need. The federal government subsidizes or pays the interest on the loan while the student is attending at least half time. The interest that accrues on these loans while a student is enrolled more than half-time is paid by the federal government (that is why it is called “subsidized”).
An unsubsidized loan is awarded to students who do not have financial need or students who don’t qualify for a maximum subsidized direct loan. For more details on Federal Student Direct Student Loans please visit Federal Student Aid Website. To apply for a Federal Direct Student Loan, click here for instructions.
Once the borrower has received Direct Subsidized Loans for a period that is 150% of the published length of the borrower's current education program, the borrower is no longer eligible for Direct Subsidized Loans.
A first-time borrower who loses eligibility for additional subsidized loans loses interest subsidy on subsidized loans received on or after July 1, 2013 of the borrower did not complete the program AND continues enrollment in the program OR enrolls in another program of the same of shorter length.
For students enrolled as regular students in eligible programs, annual Federal Direct Loan limits are as follows:
Dependent Undergraduate Students
Independent Undergraduate Students and Dependent Undergraduate Students Whose Parents Cannot Borrow PLUS
Federal Direct Parent Loans for Undergraduate Students (PLUS)
The Federal Direct PLUS Loan Program allows parents of undergraduate students to borrow up to the cost of attendance minus other financial aid. A parent applying for a Federal PLUS loan must be a biological or adoptive parent. A step-parent whose information is included on the FAFSA is also eligible to apply for the loan. A parent seeking a loan must not have an adverse credit history. For Direct PLUS loans first disbursed on or after July 1, 2018 and before June 30, 2019 the interest rate is 7.595%. Federal Direct PLUS loans have an origination fee of 4.264% assessed by the U.S. Department of Education and deducted from each loan disbursement.
Private student loans are made by private lenders to students and most require credit-worthy cosigners. These loans may be more expensive than Federal Direct PLUS loans and students should first maximize any eligibility under the federal loan programs. Private loan fees and interest rates vary among lenders. All lenders will review the borrower's and cosigner’s credit history. McDaniel College does not endorse any specific lender or group of lenders.
Congress has mandated that private loan lenders require borrowers to complete a Private Education Loan Applicant Self-Certification Form when requesting any private education loans. The self-certification form must be submitted to your lender. Forms should NOT be sent to McDaniel College. It must be completed by the borrower and sent to the lender that you are applying with. While we cannot fill out this form for you, we can give you the information needed to complete the form.
Your cost of attendance and estimated financial assistance are needed to fill out section 2 of the form. Cost of Attendance information can be found here. You can access your financial aid award details online by using the Financial Aid Self Service Tool. Once the form is complete please return it to your lender.