This issue: Federal Direct Loans
Source: www.finaid.org There are two types of Federal Direct Loans: subsidized and unsubsidized.
- With a subsidized loan, the government pays the interest while you're in school. To receive a subsidized Direct Loan, you must be able to demonstrate financial need.
- With an unsubsidized loan, you pay all the interest, although you can have the payments deferred until after graduation by capitalizing the interest. This adds the interest payments to the loan balance, increasing the size and cost of the loan. All students, regardless of need, are eligible for the unsubsidized Direct Loan.
- Repayment begins after the student graduates or drops below half-time enrollment. The standard repayment term is 10 years, although one can get access to alternate repayment terms by consolidating the loans.
Direct Loan Limits The chart below illustrates the annual and aggregate loan limits for the subsidized and unsubsidized Direct loans first disbursed on or after July 1, 2008.
Many students combine subsidized loans with unsubsidized loans to borrow the maximum amount permitted each year.
Annual Loan Limits - Direct Loan
| |||
Dependent Students
(whose parents were not denied a PLUS loan) |
Combined Base Limit for Subsidized and Unsubsidized Loans
|
Additional Limit for Unsubsidized Loans
|
Total Limit for Unsubsidized Loans (minus subsidized amounts)
|
First-Year Undergraduate (Freshman)
|
$3,500
|
$2,000
|
$5,500
|
Second-Year Undergraduate (Sophomore)
|
$4,500
|
$2,000
|
$6,500
|
Third-Year and Beyond Undergraduate (Junior, Senior)
|
$5,500
|
$2,000
|
$7,500
|
Direct Loan Interest Rates and Fees These reductions, in place since 2008, are available only to undergraduate students, not graduate students, and only for subsidized Direct loans.
Phased-in Cuts in Interest Rates on
Subsidized Loans for Undergraduate Students | ||
Year
|
Interest Rate
Subsidized Loans (Undergraduate Students) |
Interest Rate
Other Loans (Graduate or Unsubsidized) |
2008-09
|
6.0%
|
6.8%
|
2009-10
|
5.6%
|
6.8%
|
2010-11
|
4.5%
|
6.8%
|
2011-12
|
3.4%
|
6.8%
|
2012-13
|
3.4%
|
6.8%
|
