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Federal Loans: FAQ

US Federal Loans – also known as Stafford/Direct Loans – are available for US citizens studying in the UK and are designed to help fund your studies. If you want to find out if you are eligible to apply, visit our Federal Loans eligibility page.


When should you apply for your loan and how long will it take to process?

We begin processing loans for the new academic year around May. The loan approval process can take up to four weeks during peak processing periods (June to October) or longer if there are difficulties with your application. Therefore, if you need your application to be processed for a particular deadline, please ensure you apply in plenty of time (we recommend applying at least five weeks before a deadline). It is your responsibility to ensure that a complete loan application is submitted in a timely manner.

It is also possible to apply for or adjust your loans during the year. Please see the “What if you want to increase or decrease how much you borrow?” FAQ.

You have completed your Free Application for Federal Student Aid (FAFSA) but you haven't heard anything – what should you do?

As a foreign school, we are not automatically notified when a student completes their FAFSA; therefore, once you have submitted your FAFSA application, you MUST contact the Federal Aid Administrator at BU and provide them with:

  • your full name and family name
  • your Social Security Number (SSN)
  • your date of birth
  • your BU student reference number (starting with 5).

What can Federal Loans pay for?

Your US Federal Loans can only be used to pay for your course tuition fees and living expenses associated with your studies. Examples of these are food, rent and travel to the UK. These educational costs relate only to you, the student. These costs cannot include costs for partners or children (other than childcare or nursery costs).

How much could you borrow?

There are three kinds of loans – Subsidized, Unsubsidized and PLUS. The amount of money you can borrow depends on the course level and your dependency status.

Full details can be seen in the table below

Undergraduate dependent students

Undergraduate independent students

First year

$5,500 per year maximum, of which $3,500 per year is Subsidized

$9,500 per year maximum, of which $3,500 per year is Subsidized

Second year

$6,500 per year maximum, of which $4,500 per year is Subsidized

$10,500 per year maximum, of which $4,500 per year is Subsidized

Third year and beyond

$7,500 per year maximum, of which $5,500 per year is Subsidized

$12,500 per year maximum, of which $5,500 per year is Subsidized

Aggregate maximum:

$31,000 (maximum of which $23,000 is Subsidized)

$57,500 maximum, of which $23,000 is Subsidized

Postgraduate students

Annual Maximum Unsubsidized

$20,500 per year

Aggregate maximum:

$138,500 including undergraduate loans (maximum of which $65,500 is Subsidized)

What is the difference between Subsidized and Unsubsidized Loans?

The main difference between the two is that, with a Subsidized Loan, the US Department of Education pays the interest that accrues while you are studying at least part-time, for the first six months after you finish your course (known as the grace period) and during a period of deferment (if you have one). With an Unsubsidized Loan, you are responsible for paying the interest for the entire period of the loan.

You can find more details here.

What if you need to borrow more?

Your Subsidized and Unsubsidized loans may be topped up to the maximum Cost of Attendance (COA) with a PLUS loan, which is not an entitlement, but is subject to credit checking and may be declined by the US Department of Education.

There are also other forms of private education funding you can apply for, for example Sallie Mae.

What if you want to increase, decrease or cancel your loans?

You have the option to increase, decrease or cancel your loans at a later date during the academic year, provided you give us a minimum of 20 days’ notice on the disbursement date. Any increase or decrease will be spread across any remaining disbursements.

What exchange rate is used when calculating your Cost of Attendance (COA)?

We are required to yearly set a static exchange rate at the start of the loan application cycle and this must stay the same throughout the whole academic year. This exchange rate is listed on the COA. The actual amount that you will receive in GBP £ will depend upon the exchange rate available on the date that the loan funds are disbursed. The University cannot know in advance or guarantee the exchange rate used at the point of each disbursement.

What should you do if you are awarded a scholarship after your loan has been approved?

You must contact the Federal Aid Administrator at BU immediately if you are awarded a scholarship, grant or other financial award, as this must be factored into your Cost of Attendance (COA) and may affect how much you are eligible to borrow.

How will your loan be paid?

Your money will be paid in two (Undergraduate and Postgraduate Research programmes) or three (Postgraduate Taught programmes) equal installments each academic year. You will receive a notification letter from us outlining the amount of your loans, your disbursement dates, and the period / academic year your loan relates to. The wording and format of this letter has been agreed with UK Visas and Immigration as acceptable proof of funding for Tier 4 visa applications.

All disbursements are subject to the following conditions:

  • You are making Satisfactory Academic Progress
  • You are enrolled at least part-time/half-time
  • You are not in the USA
  • You have not violated any federal compliance regulations (repayment default, fraud, drugs, etc.).

The US Department of Education charges an origination fee on all loans. The loan fee is a percentage of the loan amount and is proportionately deducted from each disbursement. This means the money you receive will be less than the amount you actually borrow.

The University will deduct your tuition fees for the academic year in equal instalments from each disbursement.

You will be issued a GBP £ Sterling cheque for the remainder of each disbursement, which you collect from the BU Cash Office. If your loan disbursement is not enough to cover one-third of your tuition, then there may not be a cheque for you to collect.

Important: you will need to open a UK bank account to cash this cheque.

The amount of money you receive will vary as it is dependent upon the exchange rate from USD $ to GBP £ at the time of disbursement.

When will your loan be paid?

The US Department of Education doesn’t allow any loan to be disbursed before a student is fully enrolled on a programme, therefore we won’t be able to authorise any disbursement payment before you arrive in the UK and officially enroll at BU.

You should receive your first cheque within four weeks of arriving in the UK and enrolling on your course. In case of any unforeseen events, please ensure you have personal funds in place to cover your living costs for the first four weeks of the academic year. The value you are going to receive and the disbursements dates are shown on the Notification Letter sent to you by BU when we originate your loan. The actual amount of each disbursement in GBP £ will be dependent upon the exchange rate used to convert USD $ to GBP £ on that date.

Warning: if you do not tell us in advance (minimum of 20 days’ notice on the disbursement date) not to draw down your disbursement, then you will be responsible for all interest charges and for its repayment.

What about the period before your first loan payment arrives?

The US Department of Education doesn’t allow any loan to be disbursed before a student is fully enrolled on a programme, therefore we won’t be able to authorise any disbursement payment before you arrive in the UK and officially enroll at BU.

Important: You must have enough money to last you for the first few weeks of term, before your loan payment arrives. It can take up to four weeks after the start of term before your funds are available, so plan accordingly. In case of any unforeseen events, please ensure you have personal funds in place to cover your living costs for the first four weeks of the academic year.

UK banking

Your cheque is in GBP £ and you need to bank it to use for living expenses. It will take a few days for any cheque to clear through the bank and become available to you.

You will need a UK bank account, which may take about ten days to open. You cannot start the process until:

  • you are in Bournemouth
  • you are officially enrolled at BU (a student is fully enrolled at BU only after attending in person their Faculty official enrolment session during Week One)
  • you can prove that you are living at local address which is not a hotel.

Only after you are enrolled you can request a bank letter to open a bank account with any UK bank of your choice – the main ones have branches in Bournemouth. We cannot advise about any specific bank, you will need to check their websites or contact them about the student accounts they offer.

You received a US Federal loan at BU last year. Do you need to re-apply or will you automatically receive loans for each year of your course?

If you want to borrow US Federal or private funding for each year of your course, you must apply for your loan each academic year. Please follow the instructions on our Funding support page.

What do you need to complete at the end of your BU course?

Before you finish your BU course, you MUST complete US Federal Loans Exit Counseling. The BU Federal Loans Administrator will email you with guidance about this process.

When do repayments start?

Your Student Loan must be repaid. If you do not meet the loan repayments as required by your loan servicer, you will go into default. It is important that you understand your rights and obligations when borrowing US Federal Loans. Students are advised to fully research and understand responsible borrowing and repayment before requesting Federal Student Loans. The Federal Student Aid webpage has an estimate calculator where you can calculate your estimated loan repayments.

You will have a six-month grace period from the time you graduate, leave your course or reduce your studying to less than part-time/half-time, before you have to begin repaying your loan. Once this six-month period ends, you will need to start making repayments. You can find more details here.

Do you have to pay interest on a loan?

Yes. You can find full details here.

Will the loan servicer know when you have graduated?

BU will notify your loan servicer of any change in your enrolment status, including graduation.

How can you repay Federal Loans?

It is entirely your responsibility to repay your Federal Loans. You need to make arrangements for a repayment plan directly with your loan servicer. When you enter the repayment process, you have a right to consider the loan repayment options available to you. You can find full details here. If you fail to make the repayments, your student loan could default. This may lead to legal action, withholding of tax refunds, and/or a bad credit rating that could affect your ability to get a home mortgage, car loan or credit cards.

Can you defer Federal Loans repayments?

You can request a deferment for a number of reasons, such as if you return to school. You need to speak directly to your loan servicer to find out if you are eligible and how to request a repayment deferment.

BU is required to confirm student attendance every 60 days with the National Students Loan Data System (NSLDS). This update is submitted electronically and the information will be available to your loan servicer immediately.

If you have previous loans which need repayment deferment but have not been automatically placed into a deferment by your loan servicer, you need to complete Sections 1 and 3 of the “In-School Deferment Request” form and send a scanned copy to the Federal Aid Administrator. We will complete Section 4 of the form and send a scanned copy back to you so that you can forward it to your loan servicer. We are not able to sign any deferment forms until after you are officially enrolled at BU.

What should you do if you are struggling with repayments?

It is your responsibility to contact your loan servicer if you are having difficulty in making your loan repayments. You also need to make sure you notify your loan servicer about any changes of name, address or telephone number.

What happens if you withdraw or interrupt from your course?

If you are considering withdrawing or interrupting from your course, speak to your Faculty for academic guidance and to the Federal Aid Administrator for US financial guidance.

If you withdraw or interrupt from your course, you must write to the Federal Aid Administrator at BU and to your loan servicer, notifying them of your decision to withdraw or interrupt. You must do this within five days of withdrawing or interrupting from your course. You are also required by US law to complete Exit Counseling.

Do you have to repay the loan when you withdraw or interrupt?

You will still need to repay your Federal Loans in the normal way (as explained above) if you withdraw or interrupt from your course.

BU will complete a Return to Title IV (R2T4) calculation to calculate the amount of Title IV program assistance that has been earned, using a formula provided by the US Department of Education:

  • If it is calculated that you have completed more than 60% of your payment period, all the money you were due to receive for the payment period is considered to have been earned and no funds need to be returned.
  • If it is calculated that you have completed less than 60% of your payment period BU may need to return funds to the US Department of Education. Any funds you have already received after your tuition fees were deducted are not to be repaid immediately, but will be repaid as outlined in your MPN.

The requirements for Title IV program funds when you withdraw or interrupt are separate from BU’s refund policy for current students. Therefore, you may still owe funds to BU to cover unpaid course fees. BU may also attempt to collect any Title IV program funds from you that we are required to return.

The Federal Aid Administrator will inform you by email of the amount that BU is obliged to return to the US Federal Aid programme, the amount (if any) that needs to be paid to BU by the student, and the amount (if any) that is due to be refunded to the student by BU. The R2T4 Policy can be found in Appendix 5 of the BU Student Fees Policy.

What happens if you don’t enroll?

If you have applied for Federal Loans but don’t enroll on your course, you must notify the Federal Aid Administrator and your loan servicer immediately. We will delete your loan request and the US Department of Education will then cancel any payments due to be made to you.