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Volume 4 - FSA Handbook: Processing Aid and Managing Federal Student Aid Funds provides detailed information on the process of originating a loan and describes the actions and information required of the student and the school regarding the Federal Stafford MPN. Following is a summary of the steps involved in the process:
- The student completes the Free Application for Federal Student Aid (FAFSA). The school may also require the student to complete an institutional application.
- After federal, state and private gift aid is assessed, the financial aid administrator (FAA) first determines the student's Federal Perkins loan eligibility (if the school participates). The student's eligibility for a subsidized Federal Stafford loan is determined next, using the federal formula.
- If the student has partial or no eligibility for the subsidized Federal Stafford loan, the FAA will then determine eligibility for the unsubsidized Federal Stafford loan. Annual loan limits apply to a combination of the two Federal Stafford loan types. Independent students have greater unsubsidized Federal Stafford loan eligibility than dependent students.
- The FAA notifies the student of eligibility for a subsidized and/or unsubsidized Federal Stafford loan.
- There are two different versions of the MPN: one for the Federal Family Education Loan Program (FFELP) and one for the Federal Direct Loan Program. For a FFELP loan, the student signs a Federal Stafford Loan Master Promissory Note (MPN) promising to repay the loan. The lender/servicer generates the required disclosure documents and sends to the student.
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