There are two different ways in which federally insured student loans are funded:

• FFELP loans, which are made by banks or credit unions and are funded through the sale of bonds on the open markets; and

• Direct Loans, which are funded by the United States government.

The Federal Direct Loan and the FFELP program are identical in terms, but different in their source of funding. Both programs offer subsidized, unsubsidized and parent PLUS loans.

LOANS AT DEPAUL FOR STUDENTS

DePaul University uses the Federal Direct Loan program to provide undergraduate student loans. To be considered for a Federal Direct Loan you need to complete a 2008-09 FAFSA.

There are two types of Federal Direct Stafford Loans for students:

Federal Subsidized Direct Loan: Your eligibility is based on your financial need and academic level. You don’t have to make any payments on this loan until six months after you graduate or cease to be enrolled at least half time. The government pays the interest while you are in school and during your six-month grace period.

Federal Unsubsidized Direct Loan: Your eligibility is not based on financial need. You may borrow the cost of education minus all other financial aid you receive, up to the amount allowed for your academic level. You have two choices for paying interest: you may pay it while you are enrolled full time, or interest can accrue and become part of the principal that you will owe. You begin making payments six months after you graduate or cease to be enrolled at least half time.

Annual Loan Amounts: The government generally limits dependent freshmen borrowing to $3,500 under the Direct Subsidized loan program.

Interest Rate and Origination Fee: The interest rate on the Federal Direct Subsidized loan will be 6.0% after July 1, 2008. The Unsubsidized Direct loan is currently fixed at 6.8%.  

There is also an origination fee based on the amount of your total loan; this amount is deducted from your loan before you receive the funds.  Currently, this fee is 1%; it will reduce to 0.5% on July 1, 2008.

Additional Processing Steps: After accepting your student loan, you will need to complete an Electronic Master Promissory Note (EMPN) and an online Pre-Loan Entrance Counseling session. For more information, please visit our Types of Aid - Federal Loans Web site. You may also wish to review a helpful brochure published by the US Department of Education entitled Direct Loan Basics for Students for more information.

LOANS AT DEPAUL FOR PARENTS

The Federal Direct Loan Program also provides parent loans to parents of undergraduate students. This loan is called the Federal PLUS loan.

Generally, parents are eligible for this loan if they have a good credit history, are not in default on a federal student loan, and meet the other eligibility requirements outlined in the loan application. Parents may borrow up to the amount of the cost of education minus other financial aid received, including any other educational loans. The interest rate is fixed at 7.9%. In addition, the borrower is charged an origination fee of 4% of the amount of the total loan; this amount is deducted from the loan before the student receives the funds.

Application Procedures: Parents are encourage to complete a FAFSA, but are not required to do so. To begin the PLUS loan application process, a student and parent(s) must complete and submit the PLUS supplement form to the Office of Financial Aid.  Parent(s) must also complete an Electronic Master Promissory Note (EMPN) before funds can be received.

PLUS Repayment: PLUS repayment begins within 60 days after the final annual loan disbursement is made. Borrowers pay the Direct Loan Servicing Center, not DePaul University. The Direct Loan Servicing Center offers borrowers three repayment options; depending on the option chosen, the borrower is given between ten and thirty years to repay the loan. For more information, please review Direct Loan Basics for Parents.

ALTERNATIVE EDUCATIONAL LOANS (private, non-federal educational loans)

For many students and parents, alternative loans represent an important resource to help finance educational expenses.  Private loans can help fill the gap between need-based financial aid eligibility and total educational costs.
Alternative or private loans are non-federal educational loans. They are typically offered by private lenders (educational financing institutions, guarantee agencies, banks) to assist with educational and living expenses not covered by other financial aid. In general, you may borrow up to the cost of education minus all other financial aid you receive.

If you decide to borrow an alternative loan, you will need to choose a lender and complete the application process. Most lenders offer online and/or phone applications. The lender will run a credit check before it agrees to grant you a loan. Many student borrowers are required to have a credit-worthy co-signer.

Visit our Types of Aid section for additional information about loans and the other types of aid available to students such as scholarships, grants and federal work-study opportunities.