Federal Direct and Other Government Loans

Federal Direct Loans

Federal Direct Loans are the most common source of funding. The federal government makes these loans. Federal Direct Loans have a fixed interest rate and offer several repayment plans. 

It's important to remember that a loan is a legal obligation; the student is responsible for repaying the borrowed money with interest.

To receive federal Direct Loans, students must:

• Have a completed and valid Free Application for Federal Student Aid (FAFSA) for the current aid year on file with Salem State University
• Be a matriculated student (enrolled in a degree-seeking program)
• Enrolled at least half-time (six credits or more)
• Meeting Satisfactory Academic Progress (SAP)

Students at Salem State University are offered loans as part of their financial aid package. Students are not obligated to accept a student loan and can choose a lower amount than what was offered in their financial aid package.

Before accepting any loans, we strongly recommend that students review their current account activity, including all charges, expected refunds, and their overall financial status.

We recommend that students and their families borrow only what they need.

First-time federal Direct Loan borrowers must:

• Complete Entrance Counseling, a tool to ensure borrowers understand their obligation to repay the loan, and
• Sign a loan contract called a Master Promissory Note to agree to the loan terms.

All students must complete Exit Counseling if they are enrolled less than half-time, stop attending Salem State University, or have graduated.

After a student graduates, leaves school, or drops below half-time enrollment, they will have a six-month grace period before they must start repaying their loans.

Types of Federal Direct Loans

Direct Subsidized Loans 

Direct Subsidized Loans are available to undergraduate students who demonstrate financial need.

The U.S. Department of Education pays the interest on Direct Subsidized Loans while a student is enrolled at least half-time, during a six-month grace period after a student leaves school, and during a period of deferment (a postponement of loan payments).  

Direct Unsubsidized Loans 

Direct Unsubsidized Loans are available to undergraduate and graduate students. These loans are not need-based.

Students are responsible for the interest during all periods. They may arrange with their loan servicer to pay interest while enrolled in school. Students who choose not to pay interest during school and during grace, deferment, or forbearance periods will have the interest accrue and be capitalized.

• Capitalization means that interest is added to the loan's principal at the beginning of the repayment period. For more information on capitalization, please visit studentaid.gov.

Annual Loan Amounts and Aggregate Loan Limits

The federal government sets annual loan limits (amounts a student can borrow each academic year) and aggregate loan limits (the total amount a student can borrow for both undergraduate and graduate studies).

The annual loan limit a student can receive in subsidized and unsubsidized loans depends on their grade level and dependency status as reported on their FAFSA. 

*Dependent students whose parents are denied a Direct PLUS loan and who choose not to get an endorser or appeal the credit decision may qualify for additional Direct Unsubsidized Loan funds. 

• First and second-year students can receive up to an additional $4,000.
• Third-year students and above can receive up to $5,000 in Direct Unsubsidized Loan funds.
• The student will automatically be awarded these funds after Salem State receives the PLUS loan denial.

Student Loan Repayment

Loan Servicers

The Department of Education assigns students a loan servicer after their loan is initially disbursed (paid out). A loan servicer is a company that manages billing and other services for federal student loans at no cost to students.

During the grace period, the loan servicer will send repayment information, including a repayment schedule that specifies the first payment due date, the number and frequency of payments, and the amount of each payment. The monthly payment amount depends on the repayment plan.

Payments are sent directly to the loan servicer. Borrowers need to keep their contact information up to date with the servicer so they can receive assistance and stay on track with their payments.

Borrowers who are struggling to make their payments should contact their loan servicer for help. They will explain repayment options, such as applying for an income-driven repayment plan or a forbearance or deferment, to help you stay on track, get back on track when you fall behind, and avoid going into default.

For more information on loan servicers and current repayment, please visit:

• Who is my Loan Servicer?
• Repayment Plans
• Making Payments
• Loan Repayment Checklist
• Student Loan Consolidation
• Learn how to protect yourself from student loan debt relief scams.

Loan Forgiveness

In some cases, borrowers may be eligible for federal student loan forgiveness, cancellation, or discharge. This means they won't have to repay all or part of their loan(s). The terms forgiveness, cancellation, and discharge essentially mean the same thing.

For more information on loan forgiveness and options, please visit studentaid.gov.

Deferment and Forbearance

Borrowers facing a short-term financial challenge may qualify for a deferment or forbearance. With either option, they can temporarily pause their payments. However, it’s important to remember that both choices have advantages and drawbacks. Borrowers who qualify for either option can temporarily suspend their payments.

When discussing deferment and forbearance, two key factors are important:

• The difference between deferment and forbearance relates to interest accrual. During a deferment, interest doesn’t accrue on some types of loans. During a forbearance, interest accrues on all loan types.
  • In most cases, interest will accrue during the deferment or forbearance period. This means the loan balance will grow, and the borrower will pay more over the life of the loan.
• For a borrower seeking loan forgiveness, any period of deferment or forbearance does not count toward the forgiveness requirements. This means borrowers will not make progress toward forgiveness until they resume repayment.

For more information on deferment and forbearance, please visit studentaid.gov.

Delinquency

A loan becomes delinquent (past due) on the first day a payment is missed. The loans remain delinquent until a payment is made or other arrangements are made with the loan servicer. 

Borrowers who are 90 days or more late on their student loan payments will have their delinquency reported to the national credit bureaus, which can harm their credit score.

Default

Borrowers who fail to make their scheduled federal student loan payments for at least 270 days will have their loans go into default. The Default Resolution Group is the loan servicer for defaulted federal student loans that are more than 360 days delinquent.

Defaulting on a student loan can result in severe legal and financial consequences, including the following:

• The full unpaid amount of the loan, along with any accrued interest, becomes immediately payable; this process is known as "acceleration.”
• Tax refunds and federal benefit payments may be withheld and applied toward repayment of the defaulted loan; this process is called “Treasury offset".
• Wages may be garnished, meaning an employer might be required to withhold part of an employee's paycheck and send it to the lender to pay off the defaulted loan.
• No longer receive deferment or forbearance, and lose eligibility for other benefits, including the ability to choose a repayment plan.
• Lose eligibility for further federal student aid, including Federal Pell Grants and student loans.
• The default is reported to credit bureaus, which can harm a credit score and impact your ability to buy a car, a house, or get a credit card. It may take years to rebuild a good credit record.
• May be unable to buy or sell assets like real estate.
• The loan holder can take the borrower to court.
• Borrowers may be charged court costs, collection fees, attorneys' fees, and other expenses related to the collection process.

For more information on delinquency and default, please visit studentaid.gov

Need Help Understanding Repayment?

Salem State has partnered with Student Connections to offer additional support and ensure borrowers have everything they need to manage their federal student loans.

Student Connections is committed to supporting students. They work with schools to help borrowers through the student loan repayment process. With over 60 years of experience advising student loan borrowers, their main goal is to help borrowers find the repayment plan that best fits their needs.

This service is completely free!

While in repayment, Student Connections may contact you via emails, text messages, and phone calls to:

• Help borrowers find their loan balance and monthly payment amount
• Discuss available repayment plans
• Ensure borrowers understand their options if they need to reduce or delay their payments.

Visit My.StudentConnections.com or talk to a Borrower Advocate for free at (866).311.9450.

Additional Federal Loan Programs

Federal Nursing Student Loan

The Health Resources and Services Administration (HRSA) funds the Nursing Student Loan program. The interest rate is fixed at 5% for the life of the loan. No interest is charged while the student is in school. Students have a nine-month grace period after they leave school and up to ten years to repay their loans. These are need-based loans available to undergraduate students pursuing a degree in nursing at Salem State University.

Funds are limited and offered on a first-come, first-served basis, subject to the university's available funding.

Nursing Student Loan Eligibility Requirements

• Have a completed and valid Free Application for Federal Student Aid (FAFSA) for the current aid year on file with Salem State University.
• Demonstrate financial need on the FAFSA.
• Be enrolled at least half-time (six credit hours)
• Complete a separate Master Promissory Note and all other Nursing Student Loan documents.

Borrower Responsibilities

Federal regulations require students to complete a Master Promissory Note, Other Nursing Student Loan Related Documents, and Exit Counseling.

Students who are enrolled less than half-time, no longer enrolled in the nursing program, no longer attending Salem State, or have graduated will be contacted by their loan servicer, Unisa, to complete their Exit Counseling.

Loan Servicer

UNISA is the loan servicer and is contracted with Salem State University to perform all the billing and accounting for this loan program. 

For any questions, please contact UNISA at 1-800-875-8910.

Repayment

Borrowers have a 6-month grace period before they are required to begin repaying their loans. The repayment period is 10 years (120 months), excluding any eligible deferment periods. The required monthly repayment will be at least $40. 

The loan servicer will provide borrowers with a repayment schedule listing the amounts of their monthly payments. 

The Federal Nursing Student Loan is eligible for consolidation into a Direct Consolidation Loan. 

Deferment

Borrowers who are falling behind on their payments must contact their loan servicer, UNISA, and the Salem State Loan Repayment Office to see if they are eligible for deferment.

Borrowers must complete the Student Loan Deferment Request Form and follow all instructions. The Loan Repayment Office will do its best to process the paperwork as soon as possible.

Per the Nursing Student Loan Master Promissory Note, the eligibility conditions for deferment are:

• Active Duty member of a uniformed service of the United States (maximum of 3 years)
• Volunteer under the Peace Corps Act (maximum 3 years)
• Enrolled Full-Time or Half-Time in a collegiate nursing school (maximum 10 years)
• Pursuing advanced professional training in nursing, including training as a nurse anesthetist (maximum 10 years)

State Loan Program

Massachusetts No Interest Loan (NIL)

The Massachusetts No Interest Loan (NIL) is a state-funded program that provides zero-interest loans to Massachusetts residents to help cover educational costs. Students have ten years to repay their NIL loans. The minimum initial amount a student can receive is $1,000, and the maximum award is $4,000 per academic year. Loan amounts are determined by financial need. The lifetime borrowing limit is $20,000.

Funds are limited and offered on a first-come, first-served basis, subject to the university's available funding.

Massachusetts No Interest Loan Eligibility Requirements

• Be a permanent legal resident of Massachusetts for one year before the start of the academic year for which the loan is awarded.
• Be a U.S. Citizen or a non-citizen eligible under Title IV regulations.
• Have applied for financial aid using the standard Free Application for Federal Student Aid (FAFSA).
• Not be in default of any federal or state Student Loans for attendance at any institution or owe a refund for any previous financial aid received.
• Be enrolled full-time (at least twelve credits or more) in a bachelor’s degree program.
• Have not received a prior bachelor’s degree or its equivalent.
• Maintain satisfactory academic progress in accordance with institutional and federal standards.
• Demonstrate financial aid need as determined by their FAFSA.

Borrower Responsibilities

Students must complete a Master Promissory Note and Entrance Counseling before receiving loan funds. 

Under Massachusetts state law, students must complete Exit Counseling upon graduation or when leaving school.

Loan Servicer

All questions regarding payment instructions, balances, deferments, and address changes should be directed to the loan servicer, Educational Computer Services, Inc (ESCI).

Repayment

Borrowers are granted a 6-month grace period that begins at graduation, withdrawal, or when they drop below half-time attendance. 

Borrowers will receive a repayment schedule requiring a minimum monthly payment of $50.00. The loan repayment period may not exceed 10 years, excluding the 6-month grace period and any deferment extensions. 

Late charges may be imposed if a borrower fails to make scheduled payments on time. If a borrower fails to make scheduled payments in accordance with the terms of the promissory note without a deferment, the loan may be declared in default, and immediate payment of the entire loan balance, including principal and late charges, may be demanded. 

If no payment is made within 120 days, the loan will be in default. All future state financial aid will be denied. The loan will be transferred to a collections agency. 

Deferment

Borrowers may have State No Interest Loan payments deferred for a specific time period, provided that proper documentation is received, processed, and accepted by the Commonwealth of Massachusetts or its designee.

Deferments may be granted for:

• Enrollment of at least half-time in an eligible degree or certificate-granting program.
• Hardship deferment (for up to 3 years) due to unemployment, long-term illness, disability, or other extenuating circumstances, approved by the Commonwealth of Massachusetts or its designee(s).
• Military deferment while serving as a member of the U.S. Armed Forces, service in the commissioned corps of the U.S. Public Health Service, or active duty member of the National Oceanic and Atmospheric Corps.
• Volunteer service in Peace Corps, ACTION Programs, or comparable full-time volunteer work for approved, specified tax-exempt organizations.

Discontinued Loan Programs

Federal Perkins Loan

The Federal Perkins Loan Program provided money for college or career school for students with financial need. 

The authority for schools to make new Federal Perkins Loans ended on Sept. 30, 2017. 

For more information on Perkins Loan Repayment, please visit the Loan Repayments page.