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Federal Direct Loans for Undergraduate Students

These fixed-rate, federally guaranteed loans are processed through the Federal Direct Loan Program. Loans will be issued in the student’s name, and the student will be responsible for repayment.

Eligibility

To be eligible, students must be admitted into an undergraduate degree program and must be enrolled in a minimum six credit hours of degree-level, eligible coursework.

Eligibility for Federal Direct subsidized loans is based on financial need as determined by the FAFSA, and maximum subsidized loan eligibility will be processed prior to determining unsubsidized loan amounts.

Benefits

There are of two types of Federal Direct Loans:

  • Subsidized loans – Interest is not charged on the loan until repayment begins, after which it will accrue at a 3.40% fixed rate (for 2012-13). 
  • Unsubsidized loans – Interest accrues while in school, with the interest rate set at 6.8% fixed. In-school interest payments are optional, but are recommended to help reduce a student’s overall debt burden.

Federal student loans will automatically be processed and listed on award letters, and students may contact our office or use STARS to cancel/reduce loan amounts. Receiving other forms of aid (scholarships, grants, etc.) can reduce the total amount of loans a student may receive for the academic year.

Prior to disbursement, a federal origination fee of 1% is deducted proportionately from each loan payment forwarded to the school by the DL Loan Origination Center (i.e. for every $100 borrowed, the student receives $99).

Annual Loan Limits for Undergraduate Students

Academic Year Base Award (Sub/Unsub) Additional Unsubsidized Parent Denied PLUS Loan -OR- Independent Student
1st year (1-29 hours) $3,500 $2,000 $4,000
2nd year (30-59 hours) $4,500 $2,000 $4,000
3rd and 4th years (60+ hours) $5,500 $2,000 $5,000

Aggregate loan limits cap the total amount of Federal Direct Loans a student can accumulate. Keep track of your outstanding federal student loans online.

Aggregate Loan Limits for Undergraduate Students

Undergraduate Students Maximum for Subsidized Combined Maximum (Sub + Unsub)
Dependent $23,000 $31,000
Independent $23,000 $57,500

Once a student reaches aggregate loan limits, they are no longer eligible to receive federal student loans, and may instead consider a private student loan. 

Please note that, starting with new borrowers beginning on or after July 1, 2013, eligibility to receive subsidized loans will also be limited to 150 percent of the length of the student’s academic program (i.e. students in a four-year program will be eligible for subsidized student loans for the equivalent of six years).

Application

To be considered for Federal Direct Loans, a student must submit a Free Application for Federal Student Aid (FAFSA). 

Additional Requirements

First time federal student loan borrowers must complete Entrance Counseling and a Master Promissory Note in order to receive their loan funds.

Funds must be requested while the student is actively enrolled, giving a minimum one week notice to allow for processing. Federal student loans cannot be requested to pay a past due balance after enrollment has ended for that term.

Repayment Information

Federal Direct Loans are deferred (repayment is delayed) until the student graduates, leaves school, or drops below half-time enrollment. Once deferment ends, the student will have a six-month grace period before repayment begins.

Students who may have difficulty repaying their loans should always communicate with their loan servicer and review options for postponing repayment. There are also a variety of repayment plan options for eligible students.

Students may also consider consolidation of their federal loans through the Direct Loan Consolidation programs.