Loan FAQs
Frequently Asked Questions
What is the FAFSA?
This is the Free Application for Federal Student Aid (FAFSA). Students complete this form each year as part of the application process for a Stafford Loan. The form is also used to help determine eligibility for other federal aid programs. Students can complete the form online at www.fafsa.ed.gov, or they can call the Federal Student Aid Center at (800) 433-3243 to request that a FAFSA be mailed to them.
Am I eligible to take out a Stafford Loan?
To be eligible to take out a Stafford Loan, you must:
- Complete the FAFSA for the academic year you need the loan
- Be enrolled at least half-time during the period you need the loan
- Be a U.S. citizen or permanent resident without conditions
- Maintain satisfactory academic progress as determined by your school
- Have no unresolved defaults from prior federal education loans
To be eligible to take out a Parent PLUS Loan, you must:
- Be the natural, step, or adoptive parent, or legal guardian of an eligible dependent student
- Have a dependent student who is under the age of 24. The student must be single with no dependents, an undergraduate student who is enrolled at least half-time in a college or university, making satisfactory academic progress as determined by the school, and a U.S. citizen or permanent resident without conditions
- Be a U.S. citizen or permanent resident without conditions
- Pass a standard five-year credit check that has lenient government guidelines
- Have no unresolved defaults from prior federal education loans
To be eligible to take out a Graduate PLUS Loan, you must:
- Be a graduate or professional student
- Complete the FAFSA for the academic year you need the loan
- Be enrolled at least half-time for the period you need the loan
- Be a U.S. citizen or permanent resident without conditions
- Pass a standard five-year credit check that has lenient government guidelines
- Have no unresolved defaults from prior federal education loans
For loans first disbursed 7/1/08–6/30/09, the fixed interest rate on Stafford Loans for graduate students and for Unsubsidized Stafford Loans for undergraduate students is 6.8%; for Subsidized Stafford Loans for undergraduates it is 6%.
What is the interest rate on the Federal PLUS Loan?
The interest rate for Parent PLUS Loans and Graduate PLUS Loans first disbursed on or after July 1, 2006 is fixed at 8.5%.
How do I select AMS as my lender?
Make sure that on your Stafford or PLUS Application and Master Promissory Note, AMS is listed as your lender with the appropriate lender code. You may call AMS directly to obtain this information. You can request a Stafford or PLUS application online or by calling (800) 891-4203.
What is a Master Promissory Note (MPN)?
The Master Promissory Note (MPN) is a legal document the borrower signs when obtaining a student or parent loan. In many cases, once an MPN is on file from a borrower, it can be used again, each year, for up to 10 years. However, the borrower should initiate the PLUS loan each year. In the case of the Stafford Loan, this is achieved by completing a FAFSA each year.
Do I have to submit a new MPN if I change schools?
Yes. A new MPN should be completed if a student changes schools and wishes to take out the same type of loan at the new school.
Where do I send my loan Application and Master Promissory Note (MPN)?
Some schools prefer to receive the application first, others ask that you send it to AMS initially. To determine your school's policy, check with AMS by calling (800) 891-4203.
What is the sequence of events in processing a federal education loan?
Several parties are involved in the loan process: the school, the lender (AMS), the guarantor, the disburser, and the servicer. Many times, the guarantor, disburser, and the servicer are the same organization.
Though the process may vary from school to school, here is a general flow of events:
- The student or parent borrower completes and submits their loan Application and Master Promissory Note (MPN).
- The application is certified by the school, manually or electronically, in collaboration with the guarantor and the disburser of the loan funds.
- The guarantor guarantees the loan and notifies the disburser for the lender to disburse the loan funds to the school.
- The disburser delivers, by check or electronic means, the loan funds to the school on the dates, and in the amounts and number of disbursements instructed by the school.
- The servicer then takes over the administrative duties of keeping track of the loan, sending statements, and billing the borrower when repayment begins.
This is an agency that insures federal education loans against default (non-payment) under the Federal Family Education Loan Program (FFELP). AMS works with more than 25 guarantors around the country, and each federal education loan we disburse is insured by one of these partnering guarantors.
What is a disburser?
This is the party that oversees the disbursement of federal education loan funds for AMS once a borrower's application has been certified by the school and guaranteed by the guarantor.
What is a loan servicer?
When you choose AMS as your lender, AMS proceeds to work with a servicer, such as Sallie Mae, which performs such tasks as collecting payments and responding to borrower inquiries. After your loan funds are disbursed, all loan statements will come from the servicer on behalf of AMS.
When does repayment on my Stafford Loan begin? How do grace and deferment periods delay repayment?
Repayment begins six months after the student graduates or drops below half-time enrollment.
This six-month period is called a grace period. If a student enters repayment but later returns to school at least half-time, he or she may apply for a deferment (postponement) of repayment.
Deferments are also available to students pursuing full-time study in fellowship programs and rehabilitation-training programs. Please contact your loan servicer to discuss deferments.
When does repayment on my PLUS Loan begin?
Parent and Graduate PLUS Loan borrowers enter repayment immediately after final disbursement of loan funds. However, Graduate PLUS Loan borrowers can defer making payments while they're in school.
For Parent PLUS Loans first disbursed 7/1/08 or later, borrowers may choose to postpone making payments until six months after the beneficiary student leaves school or drops below half time. During the postponement period, borrowers will receive quarterly interest statements and have the option to pay accrued interest. Any unpaid accrued interest will be capitalized.
What if I have trouble making payments?
Borrowers may request a forbearance if they are having trouble making payments. Forbearance is the temporary postponement of payment due to economic hardship. Interest is still applied to a loan during forbearance.
What is default?
This is the failure to repay a loan according to the terms agreed to in the promissory note. To avoid default, borrowers experiencing economic hardship should contact the servicer of their loan to discuss possibilities of forbearance and deferment. There are serious consequences for defaulting on a federal education loan, including withholding of income tax refunds, wage garnishment, loss of financial aid, loan collection charges, and legal action.
What is a default fee?
This is a 1% fee, of the principal loan amount, charged by guarantors for the service of guaranteeing your federal education loan. This fee is subtracted from the borrower's loan funds before they are disbursed to the school. Some guarantors and lenders may pay this fee on behalf of the borrower.
What is an origination fee?
This is a fee paid to the federal government as a cost for insuring the federal loan program and to help offset the cost of federal subsidized loans. For loans first disbursed 7/1/08–6/30/09, the fee is 1% on a Stafford Loan and 3% on a PLUS Loan.
What is capitalization?
This is the process whereby a lender adds unpaid interest to the principal balance of a loan.