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 Southwestern College participates in the William D. Ford Federal Direct Loan Program, formerly the Federal Family Education Loan (FFEL) Program.  The Direct Loan Program offers the same types of loans as the FFEL Program.  Direct Loans have the same terms and conditions as FFEL Program, but instead of a bank lending the money, the U.S. Department of Education (the Department) lends the money directly to students through the student’s school. 

  • Direct loans are simple. You borrow directly from the federal government and have a single contact for everything related to the repayment of your loans.
  • You will have online access to your account information 24 hours a day, 7 days a week at
  • You can choose from several repayment plans that are designed to meet your needs.
Dates to Remember: Students are encouraged to submit all Direct Loan paperwork by the following dates to ensure prompt processing and to receive funds prior to the end of the term. 
  • December 2, 2014 - Last day to submit your loan request for the Fall 2014 semester only ( Students who will not attend the Spring 2015 semester)
  • TBD – Last day to submit your loan request for the Spring 2015 semester only ( Students who did not attend the Fall 2014 semester)
  • TBD - Last day to submit your loan request for the 2014-2015 academic year Fall 2013 & Spring 2014
  • TBD – Last day to submit your loan request for the Summer 2015

Students who submit Direct Loan application after the dates mentioned above will have their funds disburse after the end of the term but keep in mind the following:

  • Your semester grade must be posted to your academic transcript
  • You completed the required number of units to qualify for the funds awarded

Subsidized Direct Loan Lifetime Eligibility (Effective July 1, 2013 for New Borrowers only)

Effective July 1, 2013, students who are considered new borrowers will have a lifetime limit on Subsidized loan eligibility of 150% of their declared program. A new borrower is a student who has a $0 (zero) balance of loans in repayment. This includes students who have never borrowed a Subsidized loan and students who previously borrowed a Subsidized loan and who has repaid the loan or will repay the loan in the future so that the balance is now $0.

The 150% limit is based on each student's program. In general, students at a community college are enrolled in a two year Associate's degree program. Therefore, they will be limited to three years of Subsidized loan eligibility. Once students reach the 150% limit, they will no longer be eligible for Subsidized loans at a two year school.
Students who transfer to a four year university will receive a new limit at that school which generally will be up to six years. Students who transfer from a four year university and who have borrowed three years of Subsidized loans prior to attending a community college will not be eligible for a Subsidized loan because they will have already reached the 150% limit.

For additional information please refer to the link below:

Experimental Sites Initiative

Important Notice

Effective 2013-2014, Southwestern College has been approved by the U.S. Department of Education to participate in an experimental initiative to reduce over-borrowing and risk of loan default. This will allow our college to eliminate the Unsubsidized Loan eligibility for certain groups of students. This decision is final and cannot be appealed to the U.S. Department of Education.

Based on this initiative, the following categories of students will not be eligible to borrow Unsubsidized Loans:


1st year is defined as students who have completed less than 30 units in their current program of study and 24 units out of the 30 must be degree applicable. Units that will not be counted towards the 24 units are basic skills or remedial or any other units that are not applicable to the current program or major based on the educational plan


Students who have borrowed subsidized and unsubsidized loans with a combine total of $12,500 or more. Total loan debt includes loans from ALL schools attended


Students who attended a SAP workshop and submitted an appeal

Types of Loans:

Federal Direct Subsidized Loan: provides low interest rates and are available to students who demonstrate financial need determine by the information provided on the FAFSA. The Federal government pays the accruing interest on the loan while attending school at least half time or during deferment status. Please note: Direct Subsidized loans will not be eligible for an interest subsidy during the six-month grace period when the loan is in the six-month grace period after the student is no longer enrolled at least half time, or if the loan is in a deferment status. This provision eliminates the interest subsidy provided during the six-month grace period for subsidized loans for which the first disbursement is made on or after July 1, 2012, and before July 1, 2014. If a student received a subsidized loan during this timeframe, they will be responsible for the interest that accrues while their loan is in the grace period. They do not have to make payments during the grace period (unless you choose to) but the interest will be added (capitalized) to the principal amount of their loan when the grace period ends. This provision does not eliminate the interest subsidy while the borrower is in school or during eligible periods of deferment.

Federal Direct Unsubsidized Loan:  provides low interest rates and are available to all students regardless of financial need. Interest begins to accrue from the date the loan is disbursed, though you can choose to pay it later if you are in an in-school, grace, or deferment status. If the student does not pay the accruing interest, it will be added to the principal amount of their loan and increase the amount they have to repay. If the student pays the interest as it accumulates, they will repay less in the long run.

Federal Loan limits, Interest Rates and Fees

Annual Loan Limits:

The maximum amount you can borrow each academic year depends upon your Financial Aid Eligibility and your Grade level (this includes transfer units).

Dependent/Independent status is determine by the Department of Education based on the information that the student provides on the Free Application for Student Aid (FAFSA)


Dependent Students
Direct Loan Annual Limits


Base Amount


Yearly Maximum

Grade Level 1
0-29.9 completed units




Grade Level 2
30+ completed units





Independent Students
Direct Loan Annual Limits


Base Amount


Yearly Maximum

Grade Level 1
0-29.9 completed units




Grade Level 2
30+ completed units





Aggregate Loan Limits
Maximum Total Outstanding Loan Debt

Subsidized/Unsubsidized Aggregate


(maximum $23,000 subsidized)


(maximum $23,000 subsidized)


Students with “No Need”:

Students with No Need and who do not qualify for the Subsidized Loan may be eligible for the Unsubsidized Loan:

Up to $5500 per year – 1st year (student qualifies if he/she does not have need and is not eligible for Sub loan)

Up to $6500 per year- 2nd year (student qualifies if he/she does not have need and is not eligible for Sub loan.

Interest Rates:

These interest rates are effective for all Direct Loans with a first disbursement on or after July 1, 2014. The interest rates are calculated using a base 10-year Treasury Note Index of 2.612% plus an add-on amount for each loan program of 2.05% for Direct Subsidized Loans and Direct Unsubsidized Loans for undergraduate students, 

Under the new interest rate structure, all Direct Loans except Direct Consolidation Loans will be “variable-fixed,” meaning students would receive a new rate with each new loan, but then that rate would be fixed for the life of the loan. There are also interest rate caps at 8.25% for Direct Subsidized Loans and Direct Unsubsidized Loans for undergraduate students. For Direct Consolidation Loans, the interest rate remains the weighted average of the interest rates of the loans included in the consolidation, rounded up to the next higher one-eighth of one percent, without a cap.

The chart below shows the interest rates for Subsidized and Unsubsidized loan programs.  Both types of loans have the same repayment terms.  Payment of interest and principal on both Subsidized and Unsubsidized loans begins after you cease to attend at least half-time at Southwestern College.

Federal Direct Student Loans 2014-2015 Interest Rates

Effective for Loans With a First Disbursement on or After July 1, 2014

Loan Type

Student Grade Level


Index Rate










10-Year Treasury Note Index

Add -On

2014-2015 Fixed Interest Rate

Interest Rate Cap

Direct Subsidized Loans

Undergraduate Students







Direct Unsubsidized Loans

Undergraduate Students









Direct Subsidized Loans and Direct Unsubsidized Loans with a first disbursement date on or after December 1, 2013, and before October 1, 2014 have a loan fee of 1.072%. This fee is deducted before you receive your loan.  The amount you actually receive will be less than the amount you have to repay.

Grace Period

When borrowers cease to be enrolled at an eligible school on at least a half-time basis, a six-month grace period begins. The repayment period for a Direct Subsidized Loan begins and interest begins to accrue the day after the grace period ends.

Confirmation Process

This process ensures that the borrower wants to apply for a Direct loan. Southwestern College initially uses the Active confirmation. Active confirmation   is where students initiate the loan process by completing a loan application. Once students has been certified Southwestern college uses the Passive confirmation for students who wants to update their loan request either to increase or decrease their loan amount previously requested.

Master Promissory Note (MPN)

The MPN is the legal document through which you promise to repay your Direct Loans and any accrued interest and fees to the Department.  It also explains the terms and conditions of your loans, provides consumer information and your rights and responsibilities as a student borrower. A Direct Loan MPN can be used to make loans for up to ten consecutive (10) years.  You may complete a Direct Loan MPN electronically or complete a paper application via the Web site at  

You must complete a Direct Loan Master Promissory Note (MPN). Although you may have previously signed an MPN to receive FFEL Program loans, a FFEL MPN cannot be used to create Direct Loans.

To complete a Direct Loan MPN electronically, you must have a Federal Student Aid PIN.  The Federal Student Aid PIN is the same PIN used to complete the Free Application for Federal Student Aid (FAFSA).  To apply for a PIN if you do not already have one, or for customer service regarding a previously assigned PIN, visit

Loan Entrance Counseling

Students who are first-time borrowers of subsidized or unsubsidized Federal Stafford loans must receive entrance counseling at or before Southwestern college can release the first loan disbursement. Entrance counseling helps ensure that the borrower understands the terms and conditions of the loan, as well as his or her rights and responsibilities, before receiving the loan proceeds. Borrowers who do not complete an entrance counseling session will be unable to receive their federal education loan funding.

Loan entrance counseling is available at  Students will need the FAFSA PIN number to enter the website

Loan Exit Counseling

Students who have taken out Federal loan to help pay for college are required by federal law to have loan exit counseling before they graduate , leave school , or drop below half-time enrollment. Exit counseling provides important information needed to prepare to repay federal student loans. It reacquaints students with the type- or types – of loans which they have, the amount of their indebtedness, and their rights and responsibilities under each loan program

Loan exit counseling is available at

Students will need their FAFSA PIN number to enter the website. Students will also be asked to provide the name, address, email address, and telephone number for their next of kin; two references who live in the U.S.; and current or expected employer (if known).

The student will take a short "exam" specific to their loan program. All questions on the exam must be answered correctly before the exit counseling is considered complete.

Upon completion of the exam, students will print the confirmation page and sent to the financial aid office that they have completed the exit counseling successfully

Students who do not complete Exit Counseling will have a hold placed on their records until the requirement is satisfied. The hold prohibits you from obtaining grade transcripts and/or diplomas and from registering for classes at Southwestern College. Once you have completed the loan exit counseling requirement, the hold will be released.

Direct Loan Packaging Policy

  • Loans are not included on the initial award letter. Students are instructed on the award letter to come to the financial aid office to inquire about loan eligibility. A letter is also sent to students who have no demonstrated need according to federal methodology. In this letter the student is instructed to come to the financial aid office to inquire about loan eligibility.

Direct Loan Requirements

  • Complete the Free Application for Federal Student Aid (FAFSA) and any other required documents.
  • Student must have a completed financial aid file and have been packages for eligible aid before a Direct Loan Application will be processed
  • You must receive an Award letter prior to requesting a Federal Direct Student Loan application. Direct Loan application is available at the Financial Aid Office
  • Complete the Electronic Master Promissory Note if you are a new Southwestern College Borrower
  • Complete and pass the required Entrance Loan Counseling
  • Complete and pass the required Exit Loan Counseling for those who drop below half time, withdraws and graduates
  • Must maintain continuous half-time enrollment for the entire loan period to receive your loan check(s).
  • Transferred units accepted at Southwestern college will be counted towards units completed in determining grade level
  • Direct loan payments will be made once you are actively enrolled in and attending 6 or more units. NOTE: classes that start later in the semester will delay disbursement of a student loan.
  • If you drop or withdraw below 6 units for the Fall 2014 semester, your loan check may be cancelled and you will have to re-apply for the Spring 2015 term.
  • You must not be in Default on any Title IV Federal Loan, or owe an overpayment on any Federal Grant from any institution.
  • You must maintain Satisfactory Academic Progress as published on the Southwestern College website.
  • You may not receive loan funds at any other institution during the period of enrollment at Southwestern College.
  • If your total loan indebtedness is at least $10,000 or you are requesting unsubsidized loans, you must complete the Budget Worksheet (available on our website) and meet with a Financial Aid Loan Specialist. Southwestern College has the responsibility to evaluate all loan requests case-by-case and reduce or deny loan request for students that, in our professional judgment, are at serious risk for loan default. High levels of indebtedness (including loans from other colleges), coupled with a small progress in an academic program, is a common indicator of high risk default. Therefore your loan request may be denied or reduced    
  • Southwestern College does not participate in Alternative Private Loan or Parent Plus loans.
  • Your loan will be prorated if you are enrolled in a program that is shorter than a full academic year or enrolled in a program that is one academic year or more in length but is in a remaining period of study that is shorter than a full academic year.

Award Letter

Award letters will be emailed to students, which will include information on the amount the loan was approved for and an attached link to the disbursement schedule

Disbursement Procedures

  • Direct Loans will be disbursed in two separate installments.
  • Student must be enrolled in a minimum of 6 units at the time of disbursement
  • First Year (have not completed 30 units in your current program),  First Time borrowers at Southwestern College will have a 30 day delay after the semester starts before the 1st loan disbursement.
  • Direct Loan checks are disbursed via direct deposit or paper check through Higher One Financial Institute
  • Direct Loan processing and disbursement will take approximately 4-6 weeks.

Right to Cancel Loan Disbursements

Please note: Students have the right to cancel all or a portion of their loans and have their loan proceeds return to the holder of that loan. Student must notify the financial aid office within 7 days of receiving their award letter of the request to cancel.

The request to Cancel Aid is available on the Southwestern College website at


Taking out a Federal Direct Student Loan will have an impact on your future credit and financial aid eligibility.  Failure to make regularly scheduled payments on your student loan can lead to a defaulted loan.

Please make sure to contact the Direct Student Loan at  if you have any difficulties in paying your loan.   This includes economic hardship, unemployment, temporary disability, or returning to school at least half-time. The government will give you several options to temporary defer your loan payments.

Consequences of Default:

  • You will not be eligible for further Federal Student Aid.
  • You will lose your deferment options.
  • Your loan may be turned over to a collection agency.
  • Your credit rating will be damaged.
  • Your wages can be garnished and your tax refund can be taken away.
  • You may be subject to legal action by the federal government.
  • Your total debt may be increased by collection fees, attorney fees, late fees, court cost and additional interest.

Contact Information

If you have any questions on Direct Loans or the SWC Student Loan Program, please contact our Student Loan Specialist, Katherine Abara, at



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Last updated: 8/10/2014 3:23:13 PM