Federal Loans

If you apply for financial aid, you may be offered loans as part of your school’s financial aid offer. A loan is money you borrow and must pay back with interest. If you decide to take out a loan, make sure you understand who is making the loan and the terms and conditions of the loan. Loans made by the federal government, called federal student loans, usually have more benefits than loans from banks or other private sources. Students are offered loans based on their grade level/degree and must adhere to all federal limits per The Department of Education. 

Depending on your degree you may be offered different types of loans:

Subsidized Loan- Direct Subsidized Loans are available to undergraduate students with financial need. Your school determines the amount you can borrow based on your Cost of Attendance and other financial aid you receive. The Department of Education pays the interest on a Direct Subsidized Loan while you’re in school at least half-time, for the first six months after you leave school (referred to as a grace period*), and during a period of deferment (a postponement of loan payments).

Unsubsidized Loan- Direct Unsubsidized Loans are available to undergraduate and graduate students; there is no requirement to demonstrate financial need. Your school determines the amount you can borrow based on your Cost of Attendance and other financial aid you receive.

You are responsible for paying the interest on a Direct Unsubsidized Loan during all periods.

If you choose not to pay the interest while you are in school and during grace periods and deferment or forbearance periods, your interest will accrue (accumulate) and be capitalized (that is, your interest will be added to the principal amount of your loan).

Parent Plus Loan- To receive a parent PLUS loan, you must be the biological or adoptive parent (or in some cases, the stepparent) of a dependent undergraduate student enrolled at least half-time (6 units) at an eligible school; not have an adverse credit history (unless you meet certain additional requirements); and meet the general eligibility requirements for federal student aid (your child must also meet these requirements).

Graduate Plus Loan- To receive a grad PLUS loan, you must be a graduate or professional student enrolled at least half-time (4.5 units) at an eligible school in a program leading to a graduate or professional degree or certificate; not have an adverse credit history (unless you meet certain additional eligibility requirements); and meet the general eligibility requirements for federal student aid.

If you are interested in using federal loans to fund your educational expenses, you will first need to complete a FAFSA for that current academic year. Once the FAFSA is processed, you will receive a financial aid award offer that may contain types of federal loans. Each loan will have a series of requirements such as Master Promissory Note (MPN) and or Entrance Loan Counseling. Requirements vary depending on the loan you are applying for.  

To find out what loan requirements you have for each loan, you can review the red flags on your My San Diego portal under the Financial Aid Requirements section, or obtain a copy of the instructions for your specific loan requirements here

What is a Master Promissory Note (MPN)?

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).

What is Entrance Loan Counseling (ELC)?

If you have not previously received a Direct Loan or Federal Family Education Loan (FFEL), the Federal Government requires you to complete Entrance Loan Counseling to ensure that you understand the responsibilities and obligations you are assuming.

If you are completing Entrance Loan Counseling to borrow a loan as an undergraduate student, then the Entrance Loan Counseling will fulfill counseling requirements for Direct Subsidized Loans and Direct Unsubsidized Loans.

If you are completing Entrance Loan Counseling to borrow a loan as a graduate or professional student, the Entrance Loan Counseling will fulfill counseling requirements for Direct Unsubsidized Loans.

What is PLUS Loan Application?

Direct PLUS Loans are federal loans that graduate or professional students and parents of dependent undergraduate students can use to help pay for college or career school.

The Direct PLUS Loan Request will verify that you are credit approved to take out the loan for the amount you are requesting. The funds from the Direct PLUS Loan may be used towards a remaining tuition balance, and is also often used for other expenses such as room & board, health insurance, books, supplies, etc. A Title IV Authorization is recommended if you plan to use your PLUS Loan or any Federal Loan for expenses other than tuition. 

If you are a parent borrower, the Direct PLUS Loan Request also allows you to:

  • Designate whether the school pays any credit balance to the student or to you.
  • Request a deferment while the student is in school.
  • Request an additional deferment for 6 months after the student ceases to be enrolled at least half time.

How Does Financial Aid Loan Disbursement Work?

After you have accepted a loan via the portal and completed all loan requirements associated with that loan the funds will disburse directly to the USD student account about 10 days prior to the start of the semester OR within about 5-7 business days (if you completed requirements after the start of the semester). Federal loans will be subject to federal origination fees which means the disbursement amount that you see on your student account may be slightly less than the amount you accepted. Also keep in mind, loans will disburse to your student account by semester which means if you are attending for Fall and Spring you will get a portion of it in the Fall and a portion of it in the Spring. 

How Do Financial Aid Refunds Work?

Once your financial aid has been applied to your student account, you may be eligible for a financial aid refund. A financial aid refund is available to you if your financial aid has paid your total USD bill and a credit remains on your account. Estimated financial aid must be posted to the student's account in order for a credit to exist and for a refund to be processed.

More Information on Financial Aid Refunds

Can I Return Loan Money If I Borrowed Too Much?

Yes. Students who receive a disbursement and or a refund for extra loan money that is no longer needed can be returned to the lender through USD during the same academic year it was borrowed. Please email us at onestop@sandiego.edu if you would like to go over this process in detail. 

If you receive a federal student loan, you will be required to repay that loan with interest. It is important that you understand how interest is calculated and the fees associated with your loan. Both of these factors will impact the amount you will be required to repay. You can view additional information about interest on the studentaid.gov website.

Current Interest Rates:

Subsidized and Unsubsidized Loan - 2.75% for Undergraduate Borrowers and 4.30% for Graduate Borrowers in the 2020-2021 Academic Year

Parent PLUS Loan -5.30% in the 2020-2021 Academic Year

Graduate PLUS Loan -5.30% in the 2020-2021 Academic Year


What is an Origination Fee?
An origination fee is a percentage of your loan amount charged by the lender for the processing of your loan. Federal student loans have an origination fee; therefore, the amount you may receive as a disbursement may be slightly lower than the amount you accept. Although some private loans do not have origination fees, federal loans generally have a lower interest rate and are less costly overall. You can find the most up to date origination fees on the studentaid.gov website. 

If you have taken out federal loans during your time at USD, repayment is done through your loan servicer. A loan servicer is a company that The Department of Education assigns to handle the billing and other services on your federal student loan. Your loan servicer will work with you on repayment options (such as income-driven repayment plans and loan consolidation) and will assist you with other tasks related to your federal student loans. Contact your loan servicer if you would like to discuss repayment plan options or change your repayment plan. You can get information about all of the federal student loans you have received and find the loan servicer­ for your loans by logging in to "My Federal Student Aid."

Don’t forget to do your Exit Loan Counseling after you graduate or are no longer attending a university for 6 months or more!