What types of Federal Direct Student loans are available?
There are two types of Federal Direct Loans: subsidized and unsubsidized.
As a student loan borrower you may be eligible for one type or a combination of both subsidized and unsubsidized.
Subsidized means the government pays the interest for you while you are in school at least half time, or in some deferment periods.
Unsubsidized means you are responsible for the interest on the loan from the first day of disbursement, even if you choose to defer the interest until your loan goes into repayment.
The interest rate on both the subsidized and unsubsidized loans is set each July 1st and is fixed for the life of the loan.
Both subsidized and unsubsidized loans go into repayment six months after you leave school or cease to be at least a half time student.
This six month period is called a grace period.
To apply for a Federal Direct loan you must first complete the Free Application for Federal Student Aid (FAFSA) as well as complete a Master Promissory Note (MPN).
What is a Federal Direct Subsidized loan?
The Federal Direct Subsidized loan is a need-based student loan program designed to assist students with educational expenses while attending school at least half-time in an eligible program of study. To determine your eligibility for a Federal Direct Subsidized loan, you must complete the FAFSA. You do not have to pay interest on a Federal Direct Subsidized loan while you are enrolled at least half-time in school. If you drop below a half-time enrollment status, a six month grace period will begin before you need to start making payments on your loan. Your interest will not begin to accrue until after your six month grace period is over. Please note: Federal Direct Subsidized loans that were disbursed on or after July 1st, 2012 and before July 1st, 2014 were not eligible for the interest rate subsidy during the 6 month grace period. Also, effective July 1st, 2012, graduate students were no longer eligible for these loans.
What is the difference between a subsidized and an unsubsidized loan?
Both subsidized and unsubsidized student loans are loans from the federal government for students pursing higher education.
If you receive a Federal Direct Subsidized student loan (sometimes referred to as a Direct Stafford Loan) you do not have to pay the interest while you are in school, during grace or during approved deferment periods.
During these periods, the government pays the interest for you on your subsidized loan.
With an unsubsidized loan your interest will begin to accrue immediately upon disbursement of your loan.
You have the option of making interest payments while you are in school or waiting until after your grace period.
If you wait to pay your interest until after your grace period all accrued interest will be capitalized.
This will increase the balance of your loan.
If you have the extra money while in school, it is a good idea to make your interest payments.
Please note that subsidized loans which originated on or after July 1st, 2012 and before July 1st, 2014 were not eligible for the interest free grace period following graduation or if you dropped below half time status.
What is the interest rate on a Federal Direct student Loan?
The interest rate on Federal Direct Subsidized and unsubsidized loans for undergraduate students with a loan period between July 1st, 2014 and June 30th, 2015 is 4.66%.
This is a fixed rate and will not change over the life of the loan.
The interest rate on Federal Direct Unsubsidized loans for graduate students with a loan period between July 1st, 2014 and June 30th, 2015 is 6.21%.
This is a fixed rate and will not change over the life of the loan.
If you have a previously borrowed Federal Direct Student loan or a Stafford student loan through the FFEL Program, and would like to check on the interest rate, servicer information, and other financial aid history, go to the National Student Loan Data System (NSLDS): www.nslds.ed.gov
What are my Federal Direct student loan limits?
As a dependent undergraduate student you are eligible for up to the following annual loan amounts depending on your financial aid award package:
*As a Freshman, you are eligible for up to $5,500.
No more than $3,500 of this amount can be in subsidized loans.
*As a Sophomore you are eligible for up to $6,500.
more than $4,500 of this amount can be in subsidized loans.
*As a Junior and Senior you are eligible for up to $7,500 per academic year.
No more than $5,500 of this amount can be in subsidized loans.
As an independent undergraduate student or a dependent student whose parents have applied for but were unable to get a PLUS Loan (a parent loan), you are eligible for up to the following:
*As a Freshman you are eligible for up to $9,500 with no more than $3,500 being a subsidized loan.
*As a Sophomore you are eligible for up to $10,500 with no more than $4,500 being a subsidized loan.
*As a Junior and Senior you are eligible for up to $12,500 per academic year with no more than $5,500 being a subsidized loan.
As a graduate or professional student you are eligible to borrow up to $20,500 per academic year in an unsubsidized direct loan.
Graduate and professional students are not eligible for subsidized Direct loans.
Is a credit check required to receive a Federal Direct Subsidized or Unsubsidized Loan?
No. A credit check is not required to receive a Federal Direct Subsidized or Unsubsidized Loan.
What is a PLUS Loan?
The PLUS Loan is an educational loan provided by the Federal Government to parents of dependent students.
The PLUS Loan is designed to help students who have financial need to pay for educational expenses while attending college.
To be eligible for a PLUS Loan, parents must pass a credit check and must be either:
a U.S. citizen or national,
a U.S. permanent resident,
or eligible non-citizen.
In addition, students must be enrolled at least half-time in an eligible program of study.
The interest rate on a PLUS Loan is fixed at 7.21% for loans certified between July 1st, 2014 and June 30th, 2015.
The interest rate is set for new loans each July 1st, and is fixed for the life of the loan.
The maximum amount parents may borrow in a PLUS Loan is the difference between the Cost of Attendance and the amount their child receives in financial aid.
So, for example, if the Cost of Attendance is $8,000, and the student receives $4,000 in financial aid, the parent may borrow up to $4,000 in a PLUS Loan.
What is a Perkins Loan?
The Perkins Loan is an educational loan provided by the Federal Government.
To be considered for a Perkins Loan, you must complete the FAFSA.
The Perkins Loan is a need-based student loan designed to assist students with educational expenses who have exceptional financial need while attending college.
The interest rate on the Perkins Loan is 5%.
If you receive a Perkins Loan, you will be given a 9 month grace period after finishing school or dropping below half-time enrollment status.
Repayment on the Perkins Loan will begin after the grace period.
What is a Grad PLUS loan?
The PLUS Loan for Graduate and Professional Degree students, also known as the Grad PLUS Loan, is a federal loan available for you to borrower up to the cost of attendance minus any financial aid awarded.