Federal Direct Loans are education loans from the U.S. government. They are either subsidized or unsubsidized. They can also be made either to a student (Stafford or Grad PLUS loans) or to a parent (Parent PLUS loans). A subsidized Stafford loan is awarded on the basis of financial need. You won’t be charged any interest before you begin
repayment or during authorized periods of deferment because the federal government “subsidizes” the interest during these periods. Unlike a subsidized Stafford loan, an unsubsidized Stafford loan and a Grad PLUS (for graduate students only) loan is not based on financial need. You’ll be charged interest from the time the loan is disbursed until it is paid in full. If you allow the interest to accumulate while you are in school or during other periods of nonpayment, it will be capitalized –
that is, the interest will be added to the principal amount of your loan, and then additional interest will be based on that higher principal amount. You can receive a subsidized loan and an unsubsidized loan for the same enrollment period. If you’re a student enrolled in an eligible program at least half time, you may receive a Federal Direct Loan. You must meet other general eligibility requirements as well. You apply using the FAFSA or Renewal FAFSA, just the way you would for other federal student aid. Then you complete a promissory note provided by the school or the U.S. Department of Education. The promissory note is a binding legal document; when you sign it you’re agreeing to repay the loan under certain terms. Read the note carefully and save it. The
maximum amount you can borrow each year in Federal Direct Loans depends on your year in school and on whether you are a dependent student or an independent student. For both Undergraduate Direct Subsidized and Unsubsidized Loans: The interest rate for Direct Unsubsidized Graduate and Professional PLUS Loans: The interest rate for Parent PLUS and Graduate or Professional Loans: Each loan also carries an origination fee which varies based on the loan type. For
loans where the first disbursement is made on or after October 1, 2019 and before October 1, 2020, the loan fees are as follows: After you graduate, leave school, or drop below half-time enrollment, your lender will send you information about repayment and notification of the date it will begin.
You have a six-month grace period before you must begin repayment. During the grace period on a subsidized loan, you don’t have to pay any principal and you won’t be charged interest. In contrast, you will continue to accrue interest on your unsubsidized loan. You have the option to either pay the interest or it will be capitalized at the end of the 6 month grace period. Failing to make payments on your loan is likely to have a negative effect on your credit rating. Get more information on Federal Direct Loans by visiting the U.S. Department of Education's Direct Loan site. William D. Ford Federal Direct Subsidized LoansSubsidized loans are only available to students who demonstrate financial need. This loan type is also a popular option for many students because interest does not accrue until after you graduate or leave school. There is a time limit on how long you can receive a subsidized loan. Learn More Who Can BorrowUndergraduate students and students who are eligible to complete a FAFSA. You must apply every year. Annual Loan LimitsHow much you can borrow is based on your academic year level, cost of education, and your financial need. When Does Repayment StartYou must start paying back your loan after you graduate, leave school, or drop below half-time enrollment. Repayment starts six-month (grace period) before you are required to begin repayment. Interest Rates and FeesFixed rates are based on first disbursement. The Department of Education pays the interest while you are enrolled least half-time, and for the first six months after you leave school (grace period) or periods of deferment. Origination fees are fixed annually and subtracted by the Department of Education prior to disbursing the funds to your Zot Account. For current interest rates and fees, visit the Student Aid website. Promissory NoteFirst-time borrowers must complete a Master Promissory Note (MPN). To find out more, visit the U.S. Department of Education. Entrance CounselingFirst-time borrowers must complete an online entrance counseling to ensure that you understand the responsibilities and obligations you are assuming. Learn more about Entrance Counseling. Exit CounselingExit counseling is required upon your graduation or leaving school. Exit counseling provides important information to prepare you to repay your loan and to review the repayment choices. Learn more about Exit counseling. Repayment PlansThe Department of Education provides several repayment plans. Estimate your repayment and find the right repayment plan for you. Student Loan ServicerA loan servicer will be handling your loan. This service is free to you. The U.S. Department of Education will inform you who your servicer will be. It is important that you maintain contact with them as they will assist you with repayment plans and loan consolidation. Learn more about student loan servicers. For more information on eligibilityVisit the U.S. Department of Education. Dependent Undergraduate Students
Independent Undergraduate Students
What is a federal direct subsidized loan?A Direct Subsidized Loan is a type of federal student loans (made through the William D. Ford Federal Direct Loan Program) where a borrower isn't generally responsible for paying interest while in an in-school, grace*, or deferment period.
Will federal subsidized loans be forgiven?Will my student loans be forgiven? All federally owned student loans are eligible for forgiveness. If you have Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, Direct Consolidation Loans or FFEL Loans owned by the U.S. Department of Education, they're all included in the forgiveness plan.
How long does it take to pay off a direct subsidized loan?Repayment Plans
The amount you pay and the length of time to repay your loans will vary depending on the repayment plan you choose. Typical loan repayment terms are 10 to 25 years. Review the Student Loan Repayment on the Federal Student Aid site.
Who pays federal direct subsidized loan?The U.S. Department of Education pays interest on subsidized loans while the borrower is enrolled at least half time in school, during a six-month grace period after graduation and during other deferment periods.
|