Direct Loans   

Financial Aid Handbook
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Direct Loans are government sponsored low interest loans. Students borrow these loans directly through the federal government and are charged a net fee of 1%. Based on the student's federal financial eligibility, a Direct Subsidized Loan, a Direct Unsubsidized Loan or a combination of both may be awarded. Check the award to see which type of Direct Loan applies to your needs.

Annual Loan Limits

Annual Direct Loan limits for undergraduate students are determined by grade level. Freshmen can borrow up to $3,500, sophomores up to $4,500 and juniors and seniors up to $5,500. 

Direct Subsidized Loans
The interest rate for Direct Subsidized Loans disbursed between July 1, 2013 and June 30, 2014 are below. The federal government pays the interest accruing on a subsidized federal loan while the student is enrolled at least half-time in a diploma or degree granting program. The loan enters repayment six months after the student ceases to be enrolled at least half-time, and interest beings to accrue at that point.

Year Interest Rate
2013–2014 3.86%
Direct Unsubsidized Loans
The interest rate for Direct Unsubsidized Loans disbursed between July 1, 2013 and June 30, 2014 are below. Interest accrual under the unsubsidized program begins at disbursement. No payments of interest or principal are due until after the six month grace period. However, students may choose to pay the interest on the Direct Unsubsidized Loan as it accrues. Any unpaid interest will be added to the principal balance of the loan when it enters repayment.

To determine eligibility for a Direct Loan, students must apply for financial aid by submitting the
FAFSA and all other required documentation.

Year Interest Rate
2013–2014 3.86%

Application Process
New Borrowers
A student is considered a new borrower if they have never borrowed a Direct Loan while enrolled at SMFA. All new borrowers must complete the following steps to secure a Direct Loan:

Complete an Entrance Counseling and Master Promissory Note (MPN) at This involves reading information and answering questions about one's rights and responsibilities when borrowing a Direct Loan. The Entrance Counseling must be done prior to the loan being disbursed.

The terms of the loans (maximum interest rate, mandatory fees, and deferment options) are set by the Federal government.

All disbursements generated through The Department of Education are electronic and will appear on the student's account.

Federal regulations governing the Direct  Loan program stipulates that the school must not hold a loan disbursement for more than three days after receipt without crediting the student's account. Also, the loan cannot be disbursed to the account until all requirements (registration, entrance counseling, eligibility, etc,) are met. Due to this time constraint, SMFA will receive a pre-disbursement roster, electronically listing all the loans that are ready to be disbursed. SMFA checks each record to make sure that each student has met all regulatory criteria and the disbursement can be accepted. SMFA receives disbursements electronically from the DOE via EFT every Wednesday and Thursday throughout the processing cycle.

Once the disbursement is received, and assuming all regulatory criteria continues to be met, the student's account is credited and the student will be notified of the disbursement.

Loan fees: A net fee of 1.072% will be deducted from each disbursement of your loan.

If the disbursement of the loan results in a credit balance on the student's account, the student will receive a refund check. NOTE: SMFA grants are not applied to the student's tuition account until after drop/add period is over, so the loan may not create a credit balance. Once enrollment has been verified and all aid has been credited to the student's account, refunds will be processed and sent to the account's billing address. Students may request that  their refund be sent to their school address by contacting the Business Office.

Exit Interview
An exit interview is required during the final semester if the student has borrowed Stafford or Direct Loans. Instructions for completing the online exit interview will be sent in an email from the Financial Aid Office.

The purpose of the exit interview is to inform the student of their rights and responsibilities based on the student loans borrowed while in attendance at SMFA. The information presented during the exit interview is a summary of the information contained on the promissory note(s) the student has signed. It is recommended that promissory note(s) be reviewed carefully in order to become familiar with interest rates and repayment terms.

Repayment begins after the grace period is completed. The standard repayment term of the Stafford Loans is 10 years, but the repayment term can be extended depending on the total outstanding principal balance. Contact your loan servicer directly for details. Consolidation of all federal student loans may be an option to explore. For more information on this, visit the consolidation page on the Student Loan Web site.

Repayment Calculator
The repayment calculator is available to help students and alumni make informed choices about their student loan repayment options. The calculator shows student loan customers what their monthly payments would be under different repayment plans, including the new Income-Based Repayment Plan (IBR) available beginning July 1, 2009. It also enables student loan customers to compare their alternatives, simulate IBR results under different incomes, estimate the likely time to pay in full, and evaluate the total cost for each option.

Repayment Calculator

Students will be billed by The Department of Education. It is important to keep your billing address and contact information up to date with the DOE. Contact the DOE with specific questions about billing cycles, methods of payment or payment amount.
If, at any time, you need information about who your loan lender or servicer is, please do not hesitate to contact SMFA's
Financial Aid Office.