Federal Stafford LoansFAQs | Capitilization of Interest
Q. What federal loans are medical students eligible for?A.Direct Unsubsidized Federal Stafford Loan
Is available to all students regardless of income. This loan is not subsidized by the federal government; you are responsible for all interest that accrues while you are in school, in deferment or during your grace period. You may choose to make interest payments while in school or may defer (and accumulate) the interest until repayment.
The Annual Limit of Unsubsidized Stafford
- $40,500 for first and second year medical students
- $47,167 for third year medical students
- $44,944 for fourth year medical students
What is the Direct Unsubsidized loan interest rate?
A.Historic Loan Interest Rates by Disbursement Dates
Fixed at 5.41 % (for loans disbursed on or after July 1, 2013)
Unpaid interest may be capitalized only when the loan enters repayment, at the expiration of a grace period or period of deferment or forbearance, or when the borrower defaults
Are there fees associated with borrowing Federal Direct Unsubsidized loans?A. Loans disbursed on or after July 1, 2013 Origination Fee: 1.051%
Unsubsidized Stafford Loans
Borrower's Rights and ResponsibilitiesThere is one type of Federal Direct Loan available for graduate / professional students:
UnsubsidizedThe Unsubsidized Federal Direct Loan is not based on need. You are responsible for all interest that accrues on your unsubsidized loans.
Aggregate Federal Direct Stafford Loan Limits
Total (subsidized & unsubsidized)*
The loan maximum for OSU-CHS Medical students is $224,000 minus any aggregate Subsidized Stafford
Use of Loan Money
You must use the loan money for authorized educational expenses for attendance at the school that certified your eligibility for the time period shown on your disclosure statement. Authorized expenses include the following:
- Institutional fees
- Dependent child care
- Commuting expenses
- Origination fee and guarantee fee
- Other documented, authorized costs
Disbursement of Loan Money
Federal regulations require that Stafford Loan aid be disbursed evenly over the number of payment periods for which the student is enrolled (in this case, semesters). OSU-CHS students attend two semesters per academic year. Each student's total Stafford loan balances will be divided by the number of semesters they attend OSU-CHS. Aid is disbursed via electronic funds transfer (EFT) to the student's account at the bursar's office before the start of each semester.
If this is your first student loan under the Federal Family Education Loan (FFEL) Program, you must receive entrance counseling before the first disbursement of your unsubsidized Federal Stafford Loan can be made.
Loan money will be applied directly to your OSU student account in the bursar's office a few days prior to the start of each quarter. We expect that your overage amounts will be processed by the bursar's office and delivered to you near the end of the first week of classes. We strongly suggest that you sign up to have your overage amounts sent by direct deposit to your personal bank account. This will ensure that you receive your overage money more quickly than if it was to be mailed to you by paper check.
Change of StatusYou must notify OSU-CHS and/or lender of certain changes.
You must notify the Office of Student Affairs if any of the following events occurs:
- You reduce your enrollment status to less than half time
- You withdraw from school
- You stop attending classes
- You fail to re-enroll for any term
- You have a change on your expected graduation date
- You change your name, local address, permanent address, or e-mail address
- Permanent address
- E-mail address
- Telephone number
- Future employer
- At least half time for the loan period certified
- At the school that certified your eligibilit
- You change your address or telephone number
- You change your name (for example, maiden name to married name)
- You withdraw from school or begin attending less than half time
- You transfer from one school to another school
- You change your employer or your employer's address or telephone number changes
- You have any other change in status that would affect your loan (for example, the loss of eligibility for an unemployment deferment by obtaining a job)
Grace PeriodYou will receive a 6-month grace period before the first payment of your Federal Direct Loan must be made. The grace period begins the day after you graduate or the day after you cease to be enrolled at least half time at an eligible school.
Repayment of Your Direct LoansAll of your loans must be repaid. You may be charged an origination and a guarantee fee for such a loan. The amount of these fees will be deducted proportionally from each disbursement.
The repayment period for your loans begins the day after your six-month grace period ends. Your first payment will be due within 45 days after your grace period ends. Your lender will notify you of the date your first payment is due.
Your principal repayment period for each loan may not exceed ten years from the day after the grace period ends except when you consolidate your loans.You will be given the opportunity to choose one of the following loan repayment plans (for the following repayment plans, the time limits shown do not include periods of deferment and forbearance):
Standard Repayment PlanIf you choose this plan, you will make fixed monthly payments and repay your loan in full within 10 years from the date the loan entered repayment. Payments must be at least $50 a month and will be more, if necessary, to repay the loans within the required time period. The number or amount of payments may need to be adjusted to reflect annual changes in the variable interest rate.
Graduated Repayment PlanIf you choose this plan, you will usually make lower monthly payments at first, and your payments will increase over time. No single payment will be more than three times greater than any other payment. The number or amount of the payments may need to be adjusted to reflect annual changes in the variable interest rate.
Extended Repayment PlanIf you choose this plan, you will make monthly payments based on fixed annual or graduated repayment amounts over a period of 25 years or less. Payments must be at least $50 a month and will be more, if necessary, to repay the loan within the required time period. The amount of payments may need to be adjusted to reflect annual changes in the variable interest rate. If at the time you sign this Note, you do not have an outstanding balance on a FFELP loan made before October 7, 1998, you are only eligible for this plan if you accumulate outstanding FFELP loans exceeding $30,000.
Income-Sensitive Repayment PlanIf you choose this plan, your monthly payments will be adjusted annually, based on your expected total monthly gross income from all sources.
There will be no penalty for prepaying any portion of your loans.All payments and prepayments will be applied in the following order:
- Late charges
- Collection costs first
- Outstanding interest second
- Outstanding principal last
Interest RatesFor Direct Loans first disbursed on or after July 1, 1998, the interest rate will be a variable rate, adjusted annually on July 1, not to exceed 8.25%. The interest rate formula and the actual interest rate applicable to each of your loans will be disclosed to you. After reviewing the actual interest rate, you may cancel or reduce this loan in accordance with the "Loan Cancellation" section.
Payment of Interest
Your lender may, during the in-school and grace periods for your loans, defer and align principal payments on your outstanding Stafford Loans. Interest that accrues on all your Unsubsidized Stafford Loans during periods when you are not making regularly scheduled payments may be capitalized (added to the principal of your loans) -- unless you pay the interest as it accrues.
Except for interest charges the federal government pays on your behalf for subsidized Federal Stafford Loans (while you are in school at least half time, during the grace period after you leave school, or during any period of authorized deferment), it is your responsibility to pay interest on the principal amount of your loans from the date of disbursement until the loans are paid in full. For all other periods and for Unsubsidized Stafford loans, it is your responsibility to pay interest on your loans.
If you inform your lender that you wish to pay interest as it accrues, but you do not submit the payments, your lender may capitalize that interest.
Capitalized interest increases the principal balance of your loans and the total amount of interest costs you incur. Generally, capitalization may occur no more frequently than quarterly, except that capitalization may also occur when your loans enter or resume repayment. The amount and frequency of interest payments will be established by your lender. (See the chart below entitled, "Capitalization of Federal Stafford Loan Interest," for further information on capitalization.)
The Loan Repayment Chart allows you to estimate this cost and estimate the effect of capitalization on your monthly payments. If necessary, you must add two or more estimates of your payments together to approximate more closely the total monthly payment.
Loan CancellationUnderstand that the terms of a full or partial loan cancellation depend on when you request the cancellation.
At any time before your loan money is disbursed, you may decline all or part of your loan money by notifying your school or lender. No origination fee, guarantee fee or interest will be charged on the amount of the loan that is cancelled.
- When OSU credits your loan to your student account, you may cancel all or part of your loan by informing your school within 14 days after the date your school sends you a disbursement notice, or by the first day of the school's payment period, whichever is later. (OSU can tell you the first day of the payment period). If you cancel all or a portion of your loan as described in this paragraph, OSU will return to your lender the cancelled amount of the loan money and the loan fees will be reduced or eliminated in proportion to the amount returned.
- At any time within 120 days of disbursement, you may pay back all or part of your loan. The loan fees will be reduced or eliminated in proportion to the amount returned.
Sale or Transfer of LoansThe lender may sell or otherwise transfer one of all of your loans without your consent. Should ownership of a loan be transferred, you will be notified of the name, address and telephone number of the new lender if the address to which you make your payments changes. Sale or transfer of your loans does not affect your rights and responsibilities under such loans.
Loan DischargeDocumentation of your death or total and permanent disability results in loan discharge. A complete application for loan discharge must be submitted to your lender, and documentation verifying the total and permanent disability must be certified by your doctor. Your lender may not approve a request for discharge on the basis of total and permanent disability for a condition that existed at the time that you applied for this loan unless your doctor certifies that the condition substantially deteriorated after the loan was made.
Your loan will not automatically be discharged in bankruptcy.
In certain cases, the Act provides for loan discharge for borrowers who are unable to complete a course of study because the institution closes, or borrowers whose loan eligibility was falsely certified by the institution.
Neither the lender, the guarantor, nor the Department of Education vouches for the equality or suitability of the academic programs offered by this school or any other school. Unless you qualify for loan discharge under the Act, you must repay the loans even if you do not complete your education, you are unable to obtain employment in your field of study, or you are dissatisfied with, or do not receive, the education you paid for with the loans.
Consequences of DefaultDefault is defined in detail in your loan promissory Note. If you default, the entire unpaid balance and collection fees on the applicable loans will become immediately due and payable. Failure to repay loans made may result in any or all of the following:
- Loss of federal and state income tax refunds
- Loss of other federal or state payments
- Legal action against you
- Collection charges (including attorney fees) being assessed against you
- Loss of your professional license
- An increase in your interest rate
- Loss of eligibility for other student aid and assistance under most federal benefit programs
- Loss of eligibility for loan deferments
- Negative credit reports to credit bureaus and/or
- Your employer withholding part of my wages to give them to your guarantor (administrative wage garnishment).
Credit Bureau NotificationInformation concerning the amount, disbursement, and repayment status (current or delinquent) of loans will be reported to one or more national credit bureau organizations on a regular basis. If you default on any loans made under this Note, that default also will be reported to national credit bureaus. Before any guaranty agency reports such a default, it will give you at least 30 days notice that default information will be disclosed to a credit bureau unless you enter into repayment arrangements within 30 days of the date on the notice. The guarantor will give you a chance to ask for a review of the debt(s) before the default is reported. Your lender and guarantor must provide a timely response to a request from any credit organization regarding objections you might raise with that organization about the accuracy and completeness of information reported by the lender or guarantor
Special Repayment Arrangements
DefermentsUnder certain circumstances, you have a right to postpone repayment if you provide your lender with a request for a deferment together with evidence that verifies your eligibility. The types of deferments that are available to you depend on when you first obtained an FFELP loan. Upon request, your lender will provide you with a deferment application that explains the eligibility requirements. If you are in default on your loan(s), you are not eligible for a deferment.
If at the time you sign your promissory Note you have no outstanding balance on a FFELP loan made before July 1, 1993, the following deferments are available where you are:
- Enrolled at least half time at an eligible school
- Engaged in a full-time course of study in a graduate fellowship program
- Engaged in a full-time rehabilitation training program for individuals with disabilities (if the program is approved by the Department of Education)
- Conscientiously seeking, but unable to find, full-time employment (for up to three years)
- Experiencing an economic hardship as determined by federal law (for up to three years)
If at the time you sign your promissory Note, you have a FFELP loan disbursed before July 1, 1993, information on additional deferment opportunities can be found in your earlier promissory note materials.
ForbearanceIf you are unable to make your scheduled loan payments, the lender may allow you to reduce your payment amount, to extend the time for making payments, or to temporarily stop making payments as long as you intend to repay your loan. Allowing you to temporarily delay or reduce loan payments is called forbearance. Interest charges continue to accrue during a forbearance period.
The lender may grant you a forbearance in the following circumstances:
- financial hardship
Your lender is generally not required to grant forbearance and may require you to provide your reasons for the request and other information. The lender may grant you a forbearance to eliminate a delinquency that persists even though you are making scheduled installment payments.
Circumstances that require your lender to grant you a forbearance include:
- Serving in a medical or dental internship or residency program, if you meet certain criteria.
- Serving in a national service position for which you receive a national service education award under the National and community Service Trust Act of 1993. In some cases, the interest that accrues on a qualified loan during the service period will be paid by the Corporation for National and Community Service.
- Qualifying for partial repayment of your loans under the Student Loan Repayment Program, administered by the Department of Defense.
- Having a monthly debt burden for Title IV loans that collectively equals or exceeds 20% of your total monthly gross income (for up to three years).
Upon request, your lender will provide you with forbearance information and a forbearance request form.
Capitalization of Federal Direct Loan Interest
What is Capitalization
Capitalization is a process whereby a lender adds unpaid interest to the principal balance of a loan. You are responsible for paying the interest due on your loan as described in Item three of this Rights and Responsibilities statement.
If you fail to make required interest payments before the beginning or resumption of principal repayment, or if you are granted a deferment (on an unsubsidized Direct Loan) or forbearance, your lender may capitalize such interest. The principal balance of your loan will increase each time your lender capitalizes unpaid interest. As a result, you will pay more interest charges over the life of the loan. When you leave school and begin repaying your loan, your monthly payment amount will be higher or, if your loan is subject to the $50 minimum payment, you will make more payments.
Contact your lender if you have questions or need more information.
This chart compares the monthly payments on Unsubsidized Direct Loans where interest is paid while the borrower is in school and loans where the interest is capitalized. This example uses the maximum interest for Direct loans, 8.25%. This is an estimate only. The actual interest capitalized will depend on disbursement date, number of disbursements, the variable interest rate, and the frequency of capitalization.
|Treatment of Interest||Loan Amount||Capitalized Interest for 12 months||Principal to be Repaid||Monthly Payment||Number of Payments||Total Amount Repaid|
|When you pay interest||$15,000||$0||$15,000||$184||120||$22,077|
|When you don't pay interest||$15,000||$1,350||$16,350||$201||120||$24,069|
Result: During repayment, you pay $17 less per month and $1,987 less over the lifetime of your loan(s) when you pay the interest as it is charged.