Loan Literacy

Types of loans:

Federal Direct Loans are low interest loans to students and parents to help pay for the cost of a student’s education after high school. The lender is the U.S. Department of Education. There are no banks or lending institutions. There are two types of Direct Loans: Subsidized loans and unsubsidized loans.

  • Subsidized loans are awarded on the basis of financial need. You won't be charged any interest until you graduate or drop below six units because the federal government subsidizes the interest during the time you are enrolled. Effective July 2012, the government will no longer subsidize the interest during the six month grace period.
  • Unsubsidized loans charge interest from the time the money is first disbursed until it is paid in full. The interest is capitalized when you enter repayment, meaning that you pay interest on any interest that has already accrued. One way to minimize how much interest accrues is to pay the interest as it accumulates. If you still have several years until you receive your degree, this can become very expensive – NOT RECOMMENDED.

Attention First Time Loan Borrowers

A first time borrower is someone who has no outstanding balance of principal or interest on a Direct Loan or FFELP Loan on July 1, 2013 or on the date the borrower obtains a Direct Loan after July 1, 2013.

Effective July 1, 2013, subsidized Stafford loans will be limited to 150% of a student’s program. This means that if a student is pursuing a two-year program at a community college, students will be limited to three (3) years of subsidized Stafford loan.

Requirements to borrow student loans:

Federal laws require all first time borrowers to participate in Student Loan Entrance Counseling. The counseling explains the terms and conditions for the loan you plan to borrow. It also provides borrowers with information about the various Direct Loan repayment options. Your campus will inform you about its counseling requirements.

If this will be your first student loan request, you must complete the Entrance Loan Counseling before submitting your loan request document. This will ensure that you understand your rights and responsibilities as a student loan borrower. Go to and click on “Sign In” under “Manage My Direct Loan”.

You will need your FSA log in information to complete the Entrance Loan Counseling. Your institution may have additional requirements.

The Master Promissory Note (MPN) is a legal document in which you promise to repay your federal student loan(s) and any accrued interest and fees to your lender or loan holder. There is one MPN for Direct Subsidized/Unsubsidized Loans, and typically schools are authorized to make multiple federal student loans under one MPN for up to 10 years.

West Los Angeles College requires borrowers to complete Student Loan Exit Counseling annually or when the borrower drops below six (6) approved units during the semester or when the borrower graduates. The Direct Loan Servicing Center will send you information on your loan and when repayment begins.

Students must be enrolled at least half time (6 approved units or more), in order to be eligible for Student Loans. If at any point during the semester a student drops below half time, the student will no longer be eligible to receive student loans and may go into repayment for their current loan balance.

Code of Conduct For Educational Loans:

West Los Angeles College is a Direct Lending school. The Higher Education Opportunity Act of 2008 (HEOA) requires that institutions of higher education participating in the administration of educational loan programs to develop and publish a Code of Conduct. Any West Los Angeles College employee who has responsibilities with respect to the student educational loans is required to comply with his Code of Conduct.

The West Los Angeles Code of Conduct prohibits us from:

  • Accepting advisory board compensation
  • Providing call center or financial aid office staffing assistance
  • Offering of funds for private loans
  • Directing borrowers to particular lenders or refusing or delaying loan certifications from lenders
  • Contracting arrangement providing financial benefit from any lender or affiliate of a lender
  • Receiving gifts from a lender, a guarantor, or a loan servicer
  • Entering into any revenue-sharing arrangement with a lender