Parent Loans


Federal Direct PLUS (Parent Loan for Undergraduate Students)

Parents of dependent undergraduate students may apply for assistance through the Federal Direct PLUS Loan Program for Parents. Parents may borrow funds under the PLUS Program to assist in paying for college expenses incurred by their undergraduate students. Students must be enrolled at least half-time (6 credit hours per term) and maintain satisfactory academic progress. Eligibility for a PLUS is based on a parent's creditworthiness and not on financial need.

Repayment of PLUS funds begins 60 days following the final disbursement of the loan each year. However, Direct Loan Servicing Center may automatically grant an in-school deferment on your Direct PLUS Loan based on information reported by your school to the U.S. Department of Education showing that you are enrolled at least half time. The Direct Loan Servicing Center will notify you of the deferment and of your option to cancel the deferment and begin making payments on your loan. Make sure you contact the Direct Loan Servicing Center to verify an in-school deferment was granted via www.dl.ed.gov or (800) 848-0979.

Application Process

1. Sign in to www.studentloans.gov using your Personal Identification Number (PIN) used when completing the FAFSA. To initiate the PLUS loan process, you must choose "Request PLUS Loan" on the left side of the screen.

Credit Check:
After completing the online application a credit check will be processed on the parent applicant. If the applicant is ninety days delinquent on any account, has declared bankruptcy, or has had a financial judgment, the PLUS loan will be denied. The Direct Loan Origination and Applicant Services (LOAS) will notify the applicant and identify the name & phone number of the agency that reported the adverse credit status. If the credit data is inaccurate, the loan denial decision may be appealed by contacting LOAS. Please note that the SMC Office of Financial Aid is not provided any information about the reason for the denial. All loan denial appeals are handled by LOAS. LOAS may be contacted at (800) 557-7394.

If the decision was based on accurate information, the applicant may exercise the option to obtain an endorser (similar to a co-signer) on the loan. The LOAS will include an endorser promissory note with the denial letter. The endorser can be the other parent or anyone who meets the above credit criteria and is willing to endorse the PLUS loan. The student may not endorse the parent's loan. The endorser note should be returned to LOAS.

Undergraduate students whose parents are unable to borrow PLUS funds may have the option to increase their Unsubsidized Loan amounts. Please discuss increasing a student loan in detail with an SMC Financial Aid Counselor.

2. Once the loan application has been approved, parents must complete the Master Promissory Note for a Parent PLUS online at www.studentloans.gov

3. All parent loan borrowers must notify the SMC Office of Financial Aid of your specific interest in borrowing a PLUS loan by completing the SMC Parent Loan Request Form. Please complete the form in ink and mail or fax to our office. This is a federal requirement and we cannot finalize any PLUS loan without this documentation on file in our office. This form must be completed each academic year.

4. Once Steps 1-3 have been successfully completed, we will add the PLUS loan to your student's SMC Award Letter. Loans can be accepted by the student via the SMC Student Portal or with a paper award letter.

Interest and Fees

Federal PLUS interest rates for 2010-2011:

  • 7.9% Fixed Rate for all PLUS borrowers
  • 2.5% Fee Assessed to Parent

Loan Type

Gross Fee

Minus Rebate*

Equals Net Fee Charged for 2010-2011

Federal Direct PLUS

4.0%

1.5%

2.5%

 

All PLUS loans have a 4% origination fee. Parents receive a 1.5% rebate at the time of origination based on paying their first 12 monthly payments on time. Therefore the assessed fee is only 2.5%. This fee reduces the amount that disburses to a student's account in the SMC Business Office. For example, if you borrow $2,000, the student will view and accept this amount on your SMC Award Letter. Because of the 2.5% origination fee, only $1,950 will actually be disbursed to the student's account and be seen on the SMC Billing Statement.

*Failure to make your first 12 monthly payments on time will result in the rebate amount being added to your principal balance.

Need further information regarding Federal Direct Parent Loans? Visit www.direct.ed.gov

Alternative/Private (Non-Federal) Loans

An alternative (also called private) loan is a loan through a commercial lender. Only look for alternative loans after you have exhausted all potential scholarships, federal grants, work-study funds, and federal loan programs via the FAFSA process.

While alternative loans might be the difference between attending college or not, alternative loans generally have higher interest rates than federal loan programs and eligibility is based on your creditworthiness, not financial need. We have highlighted some key steps in the alternative loan application process below, but for a thorough explanation of the application process and helpful Q&A, you may also want to take a look at the publication SLA Guide to Alternative Loans.

  1. Collect all the information that you need prior to starting the application process. Most lender applications require information on the borrower (the parent or the student), a co-borrower (also referred to as a co-signer) and several references.


  2. Identify a co-borrower (also called a co-signer) that will strengthen your application. A co-borrower guarantees the loan taken out by the parent/student borrower. A co-borrower can be a relative or any individual willing to take on that responsibility. You will want to ensure that they have good credit, as their credit status will play a significant role in the pricing of your loan. Given the current "credit crunch", having a creditworthy co-borrower can be critical to getting your loan approved.


  3. Plan on applying for up to 2 - 4 loans. Research indicates that applying for too many loans can have a negative impact on your credit score. The tradeoff is that by not applying for more than one loan you may be missing an opportunity to save on your loan. Recent research on just three lenders found interest rates ranged from 9.0% to 12.4% while fees ranged from 0% to 9% for a good credit borrower.

    It pays to compare! Because private loan providers offer variable rates and special incentives, do your homework and find the lender that best suites your needs. And be wary of comparing loans with different repayment terms according to APR, as a longer loan term reduces the APR despite increasing the total amount of interest paid.


  4. Understanding the interest rate index tied to the loan (i.e., what is LIBOR & Prime?) Interest rates on alternative loans are typically priced off an index, such as the Prime Rate or LIBOR index (one or three month LIBOR are common). The loan is then priced as a margin over that index (e.g., 1 month LIBOR + 6%). The current rates on these indices may be found at Bankrate.com.

    Please note that lenders update their indices on a regular basis (typically monthly or quarterly) so the rates listed above may not match the actual rates charged by lenders. Ask the lender what its Current Index is which will answer this question.

Other resourceful websites that may assist you in obtaining an alternative loan include:

Effective February 14, 2010 institutions are required to provide the Private Education Loan Applicant Self-Certification Form to alternative loan applicants, upon the applicant's request. Note the self-certification form must be submitted to your lender, and most lenders will provide you this form during your application process. Forms should NOT be sent to Spartanburg Methodist College. It must be completed by the borrower and sent to the lender that you are applying with. If you need a copy of the Self-Certification form, you may download it here. While we cannot fill out this form for you, we can give you some of the information needed to complete the form.

Alternative Loan Lenders

While parents (or students) may borrow an alternative loan from any lender of their choosing, we have compiled a list of lenders that Spartanburg Methodist College students commonly use. The list of lenders Spartanburg Methodist College students commonly use is alphabetical and provides lender links. You should review each website and decide which lender is best for you. You can borrow from one of these lenders or select one on your own. If you are borrowing from a lender not on this list, please contact the SMC Office of Financial Aid so that we can expedite the loan approval process.

Over the past five years, our largest private loan lenders by volume have been:

Sallie Mae - Smart Option Student Loan www.salliemae.com

SC Student Loan Corporation - Palmetto Assistance Loan (PAL) www.scstudentloan.org

Wells Fargo - Wells Fargo Education Connection Loan www.wellsfargo.com

Application Process

1. Choose your lender and apply for the alternative loan of your choice.
2. Complete all paperwork (MPN, Self-Certification Form, etc.) with the lender of your choosing.
3. If your lender does not provide you with a Self-Certification Form to complete, you may print a copy from our website. A private loan will not be disbursed until the Self-Certification Form is complete and on file with your lender.
4. Your student should verify and "accept" the Alternative Loan listed in his/her SMC Award Letter via the SMC Student Portal or with a paper award letter.