Student loans, unlike grants and work-study, are borrowed money that must be repaid, with interest, just like a car loan and mortgages. You cannot have these loans canceled because you didn't like the education you received, didn't get a job as a lawyer or because you are having financial difficulty. Loans are legal obligations, so before you take out a student loan, think about the amount you will have to repay over the years.
Federal Perkins Loan
The Federal Perkins Loan is the oldest loan program sponsored by the Department of Education. The Perkins Loan program is a source of low interest loans for undergraduate and graduate students. The current interest rate is 5%. Repayment begins nine months after graduation or termination of enrollment.
- Offered to students who demonstrate financial need
- Made to students enrolled full-time or part-time
- Amount actually received depends on financial need, amount of other aid, availability of funds at school
- Your lender is the Law School
- The Law School will either pay you directly (usually by check or direct deposit) or credit your account
- There are no fees or charges required to get this loan
- Repaid by you to the Law School
- You have up to 10 years to repay, depending on the amount owed
- You must sign a promissory note
- You may not possess or sell illegal drugs
- You may not be in default on a previous federal student loan or owe the federal government a refund of financial aid previously received
- You must be willing to verify the information you provided on the FAFSA
- If you are receiving a federal student loan, you must complete an entrance interview to know your rights and responsibilities
- If you are male between 19 and 25 years of age you must register with Selective Service
William D. Ford Federal Direct Loan Program
The Law School is a Direct Lending institution. Under the Direct Loan program, loan capital is provided directly to you by the Federal Government rather than through private lenders as in the Federal Family education Loan (FFEL) Program. CUNY Law, acting on behalf of the government, delivers loan funds to you. Servicing and collecting Direct Loan repayments are the responsibility of the Direct Loan Servicing Center(s) under contract to the federal government.
The Direct Loan program is the most popular form of financial aid at CUNY Law School. Direct Loans are widely accessible to students of all income levels. There are three types of Direct Loans, subsidized, unsubsidized and Grad PLUS. Depending on need, the student may be eligible for one or all loans.
Direct Unsubsidized Loan
The Direct Unsubsidized Loan is available to all students regardless of income. You are responsible to pay the interest that accrues while you are in school; however, you are not required to make interest payments while in school deferment. You may opt to make interest payments during these periods. If you decide to wait, the interest is capitalized (accumulated and added to the principal balance of your loan).
To be eligible for a Direct Loan, you must:
- Be a U.S. citizen or eligible non-citizen
- Enroll at CUNY Law at least half time
- Be up to date on all federal student loan payments
- Not have been convicted of a drug offense
- Make satisfactory academic progress
- Provide two U.S. references
- If male, register with the Selective Service (or have the necessary waiver)
- Complete the yearly FAFSA and Law School required forms
Direct Loan Amounts
Graduate students are able to borrow up to $20,500 per year (not to exceed the cost of education for the student's academic program).
The new interest rates for variable rate William D. Ford Federal Direct Loan (Direct Loan) Program loans will be in effect from July 1, 2012 through June 30, 2013.
The attached PDF document <pdf> includes charts that show the new interest rates for variable rate Direct Subsidized Loans, Direct Unsubsidized Loans, Direct Subsidized Consolidation Loans, Direct Unsubsidized Consolidation Loans, Direct PLUS Loans, and Direct PLUS Consolidation Loans. The charts also show how the new interest rates were determined using either the 91-day Treasury bill rate or the weekly average of a 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, and the appropriate add-on percentages.
All Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans with a first disbursement date on or after July 1, 2006, and all Direct Consolidation Loans for which the application was received on or after February 1, 1999 have a fixed interest rate. The interest rates for these loans are also included in the attached charts.
The interest rates are determined in accordance with Section 455(b) of the Higher Education Act of 1965, as amended (HEA). You can find the regulations for Direct Loan Program interest rates at 34 CFR 685.202(a).
Standard Repayment Plan period is 10 years. Repayment on principle begins 6 months after enrollment drops below less than half-time status. Equal monthly payments are made throughout your repayment term, each covering the principal and interest due that month. Your final payment may be slightly more or less than your other payments. Of all the options available, this plan is most likely to result in the lowest aggregated interest costs over the life of your loan. If you are unable to make the standard repayment plans, there are other repayment plans available.
Graduated Payment Plan - Reduces the amount of your monthly payments during the first years of repayment. If you select this option, your monthly payments during the first 2 years will be interest-only payments or higher depending on your loan balance. After the first 2 years of reduced payments, you may have the option to renew the graduated payment plan for an additional 2 years. Although your initial monthly payments are reduced, the aggregated interest repaid over the life of your loan and your later monthly payments will increase. This plan will not extend your repayment term. Minimum loan amounts and other eligibility restrictions may apply.
Income-Sensitive Payment Plan - This repayment option allows you to pay between 4% and 25% of your gross monthly income (not to drop below the monthly accrued interest on your loan(s)). The income-sensitive payment is offered for a year at a time, up to a total of five years over the life of your loan. The remaining terms follow a standard payment plan. Eligibility and income documentation (i.e. pay stubs for the past 2 months) must be verified annually. Additional documentation may be required.
Extended Payment Plan - If you received your first Direct Loan, Supplemental Loan for Students (SLS), or PLUS Loan on or after October 7, 1998, and the outstanding balance of these loans totals more than $30,000, you can opt to repay your loan over a 25-year term instead of a 20-year term.
Graduate PLUS Loan
The Higher Education Reconciliation Act of 2005 (HERA) introduces the Graduate PLUS loan into the Title IV loan programs. The Graduate Plus program is effective for loans certified on or after July 1, 2006. Graduate and Professional students will complete the Federal Direct PLUS Application and Master Promissory Note (PLUS MPN).
The most dramatic and exciting change to the PLUS program is that you will be eligible to receive this loan on your own signature. This will give you a valuable federal loan alternative to private loans.
Just like parent borrowers, you will be able to borrow up to the cost of your attendance less other aid received. In addition, you will have to meet the same credit eligibility requirements that apply to parent borrowers.
Similar to the current PLUS program, a 3 percent origination fee will be required by the Department of Education, and a federal default fee of up to 1 percent may be charged by individual loan guarantors. The PLUS loan interest rate changes from a variable rate to a fixed 7.9% rate for loans with a first disbursement on or after July 1, 2006.
A great feature of the new Graduate PLUS loan will be the availability of the in-school deferment. In addition, you will be able to postpone your repayment if you are enrolled at least half-time. Like the Federal Direct Stafford Loan Program (unsubsidized), interest will continue to accrue during this period.
All graduate or professional student applicants for Graduate PLUS Loans must complete the Free Application for Federal Student Aid (FAFSA).
Before applying for a Graduate PLUS Loan, a graduate or professional student must apply for and the school must determine the student's eligibility for the maximum annual subsidized and/or unsubsidized Direct Loan amount. However, a graduate or professional student is not required to receive Direct Loan funds as a condition for receiving a Graduate PLUS Loan, and a school may not require a graduate or professional student to receive Direct Loan funds before the student may apply for a Graduate PLUS Loan.
A Graduate PLUS Loan applicant must not have an adverse credit history. (A credit check will be conducted.) A Graduate PLUS Loan applicant who has adverse credit history still may be able to receive a loan documenting existing extenuating circumstances or by obtaining an endorser who does not have an adverse credit history. An endorser is someone who agrees to repay the loan if the borrower fails to do so.
Graduate PLUS Loan vs. Private Loan
With the Graduate PLUS Loan, students have more options than ever. When comparing PLUS to private loans, here are some key points to consider:
Qualification- If a graduate student has limited or no credit history, it may be more difficult to qualify for a private loan. With the Graduate PLUS Loan, not having a credit history (or having limited positive credit history) is normally acceptable. The credit requirement is less stringent than commercial loans.
Interest Rate- Although the interest rate for many private loans may be currently be lower than the new Graduate PLUS program, those rates are not fixed, nor is there typically an interest rate cap on private loans. The Prime Rate and LIBOR can fluctuate dramatically over the life of the loan. Federal fixed loans make it easier for student to plan for repayment.
Fees- With the Graduate PLUS program, students may pay as much as 3% of their original loan amount in fees. With private loans, these fees can be lower or higher depending on the borrower's credit history and income.
Deferment- You will be offered the same payment forbearance and deferment options as the Direct Stafford Loan (e.g. hardship, unemployment etc. and in-school deferment. Most commercial loans only offer one year of forbearance.
Consolidation- The Graduate PLUS loan may be consolidated with other federal loans.
Benefits of a Graduate PLUS Loan if:
- You care about the forbearance and deferment options
- You do not have great credit
- You will benefit from a fixed rate interest rate
- You can consolidate your loan with other federal loans
Benefits of a Private Loan if:
- You have great credit. You will be charged less interest, but you must be careful that the interest rate does not increase, otherwise your benefits will decrease or disappear
- You plan to borrow for a short time
- You may not use the deferment or forbearance options
- You have no problems if the interest rate exceeds beyond the interest rate cap of the Graduate PLUS Loan
The FSA Ombudsman
If you are having a problem with your federal student loan, contact the FSA Ombudsman at the US Department of Education. The FSA Ombudsman is dedicated to helping students resolve disputes and other problems with federal student loans. The FSA Ombudsman will research your problem in an impartial and objective manner and will try to develop a fair solution. The FSA Ombudsman does not have the authority to impose a solution. Nevertheless, many students have found the FSA Ombudsman to be helpful in resolving disputes with lenders. You can contact the FSA Ombudsman via this link, by phone at 1-877-557-2575 or 1-202-377-3800, by fax at 1-202-275-0549, by mail at U.S. Department of Education, FSA Ombudsman, 830 First Street, NE, Fourth Floor, Washington, DC 20202-5144, or by email.
Cancellation or Discharge
A cancellation or discharge releases you from all obligations to repay the loan. If you think you qualify for a discharge you must apply to the holder of your loan.
Qualification for a Cancellation (Discharge) of a Loan
Your student loans are only discharged under specific circumstances, and as long as you are not in default on the loan.
- Total and permanent disability
- Your loan might be discharge for working in a designated low-income school
- Other cancellations are loan specific
Your loan cannot be cancelled because:
- You did not complete your studies at the Law School
- You did not like the Law School or the Law Program
- You did not obtain employment after Law School