Federal Direct Loans

Federal Direct Loans are self-help, government loans that must be repaid with interest. The U.S. Department of Education is the lender. Students are required to be enrolled at least half-time (6 credit hours). Students must complete the FAFSA to qualify. For more information, please visit: Loans | Federal Student Aid 

ALL LOANS MUST BE REPAID.

First-time borrowers must complete Entrance Counseling and a Master Promissory Note.

Entrance counseling ensures you understand the terms and conditions of your loan and your rights and responsibilities. You'll learn what a loan is, how interest works, your options for repayment, and how to avoid delinquency and default.

ALL First Time Loan Borrowers at Luna Community College must complete entrance counseling. Entrance counseling must be completed before loan funds can be disbursed.

The Master Promissory Note (MPN) is a legal document in which you promise to repay your loan(s) and any accrued interest and fees to the U.S. Department of Education. It also explains the terms and conditions of your loan(s).

You may receive more than one loan under an MPN over a period of up to 10 years to pay for your or your child’s educational costs, as long as the school is authorized to use the MPN in this way and chooses to do so.

ALL First Time Loan Borrowers at Luna Community College must complete the MPN. The MPN must be completed before loan funds can be disbursed.

The interest rates for Sub Loans and Unsub Loans disbursed on or after July 1, 2024 and before June 30, 2025 is 6.53%. Interest rates are fixed rates for the life of the loan.

The interest rates for Sub Loans and Unsub Loans disbursed on or after July 1, 2025 and before June 30, 2026 is 6.39%. Interest rates are fixed rates for the life of the loan.

For the most up-to-date information, please visit: Subsidized and Unsubsidized Loans | Federal Student Aid 

Exit Counseling ensures that you understand your student loan obligations and are prepared for repayment. You'll learn about what your federal student loan payments will look like after school.

Who must complete Exit Counseling?

Anytime a student drops below half-time for any reason, they must complete Exit Counseling.

There are three time periods associated with Federal Direct Loans:

• In-School Deferment

• Grace Period

• Repayment

In-School Deferment

While a student is enrolled at least half time, direct loans are in an In-School Deferment status. This means students are not required to make payments on these loans during this time. Half-time enrollment at LCC is a minimum of 6 credit hours.

Grace Period

Once a student drops below half-time enrollment for any reason (less than 6 credit hours, fully withdrawing, degree completion, etc.) the outstanding direct loans will enter a grace period of six (6) months. If the student were to re-enroll at least half time before the end of the grace period, that student’s federal loans may re-enter In-School Deferment. However, if the student does not re-enroll at least half time, that student’s federal loans will enter Repayment. Once a student enters Repayment, that student no longer has a grace period, even if they re-enroll at least half time later.

Repayment

Once a student has exhausted their grace period, that student is required to begin making payments monthly for any federal loans that the student has outstanding.

A student defaults on a federal student loan when they have not made any satisfactory payments for 270 days (about nine months). Most students default because they are unaware of their options or they have not kept their information up to date with their federal loan servicer, so they miss important information. If a student defaults, that student is no longer eligible for federal student aid AND the U.S. Department of Education can garnish their wages, federal or state tax refund, or other federal benefits such as social security.

How can I avoid defaulting on my federal loans?

Stay in contact with your federal loan servicer. You can find your loan servicer by visiting the National Student Loan Data System (NSLDS). As long as you are staying in contact with your loan servicer and keeping them updated about your situation, they will be more able to assist you through the repayment process and give you options such as forbearance, forgiveness, or even cancellation.

What if I cannot afford my federal loan payments?

If you are having trouble making payments, do not ignore your loans. There are options available that can help keep your loans in good standing even when finances are tight. 

• Change Your Payment Due Date: Do you get paid after your student loan payment is due each month? if so, contact your loan servicer and ask them to switch the date on which your student loan payment is due. 

• Change Your Repayment Plan: What you ultimately pay depends on the plan you choose and when you borrowed. If you need lower monthly payments, consider an income-driven repayment plan. This type of plan will base your monthly payments on your income amount.

• Consolidate Your Loans: If you have multiple student loans, you can simplify the repayment process with a Direct Consolidation Loan. This allows you to combine all of your federal student loans into one loan and a single monthly payment. 

If these options don't work for you and you simply cannot make any payments now, you may be able to postpone your payments through deference or forbearance. However, interest may still accrue during the time you do not make payments. 

What is LCC's Cohort Default Rate (CDR)?

The Cohort Default Rate (CDR) is the percentage of a school’s borrowers who enter repayment on certain Federal Family Education Loan (FFEL) or William D. Ford Federal Direct Loan (Direct Loan) Program loans during a particular federal fiscal year (FY), Oct. 1 to Sept. 30, and default or meet other specified conditions before the end of the second following fiscal year. For more information, visit: College Navigator - Luna Community College (ed.gov)