If you need financial assistance to pay for your educational costs, two federal loan programs are available. It’s very important to understand the implications of borrowing to finance your education. Loans will become a debt that you will be obligated to repay with interest after you graduate or leave school. These loans will accrue interest while you are in school. Loans are a true investment in your education and your future as an attorney. Therefore, it is wise to be cautious and somewhat conservative in the amount you choose to borrow. You can access your federal student loan history at: www.nslds.ed.gov.
Student loans can only cover educational expenses that are non-discretionary and that occur during the time you are officially enrolled as a student. For example, while modest living expenses are covered, your financial aid budget does not allow for the purchase of a car, car payments, credit card debt, or a spring break trip.
Federal Direct Loan Programs
IU participates in the Federal Direct Loan Program. There are two types of loans available to graduate students through the Federal Direct Loan Program: Direct Unsubsidized Loans and Graduate PLUS Loans.
Federal Direct Unsubsidized Loans
To apply for the Direct Unsubsidized Loan, you simply need to complete your FAFSA. Eligible students will automatically be awarded their maximum eligibility sometime in early June. You can borrow up to $20,500 per academic year (limited by the estimated cost of attendance less any other financial aid you may receive.) In mid-July, you will also need to complete a master promissory note (MPN), if you do not already have a valid MPN on file.
The interest rate on the loan is currently fixed at 6%, and it begins accruing at the time of disbursement. There is also an upfront 1.066% origination fee, which is deducted from your loan upon disbursement. The Direct Stafford Loan lifetime aggregate limit is $138,500.
While you are in school, you will have the option to pay your accrued interest quarterly. Unpaid interest continues to accrue and will be compounded 6 months after your enrollment drops below half-time status . Your loan servicer should automatically postpone repayment until six months after you graduate.
Federal Direct Graduate PLUS Loan Program
For those students who need to borrow more than the $20,500 available through the Direct Unsubsidized Loan Program, they may apply for a Direct Graduate PLUS Loan to meet the remainder of their financial need.
Graduate PLUS Loans currently have a 4.264% upfront origination fee and the interest rate is fixed at 7%. Interest begins accruing upon disbursement and students have the option of paying it quarterly. Unpaid interest will continue to accrue and will be compounded six months after your enrollment drops below half-time. Your loan servicer should automatically postpone repayment until six months after you graduate.
Graduate PLUS Loan requests can be submitted on line beginning in mid-June once you receive your official financial aid notification in early June. If your credit is approved, you will then need to complete a master promissory note in order for the funds to disburse.
You must have good credit to receive funding from this program.
Be sure to obtain a copy of your credit report to make sure that all of the information recorded is accurate and to help you identify items that might need resolution before you submit your GRAD PLUS application. A borrower would be denied a Graduate PLUS loan:
- If they are considered 90 or more days delinquent on the repayment of debts exceeding $2,085, or if debts exceeding that amount have been placed in collection or charged off during the two years preceding the date of the credit check.
- If they have been the subject of a default determination, bankruptcy discharge, foreclosure, repossession, tax lien, or wage garnishment during the five years preceding the date of the credit report.
- If they have a write-off of a Title IV debt during the five years preceding the date of the credit report.
The reasons for being denied a Graduate PLUS Loan are not limited to these examples, but the results have shown that good credit is needed to receive a Graduate PLUS loan.
You can obtain a free annual credit report from any of the three major credit bureaus: Equifax, Experian, and TransUnion. If your ability to attend law school is contingent upon borrowing a Graduate PLUS Loan it is critical that you find out whether you are able to borrow ahead of time.