Direct Loans

What is a federal Direct Loan?

According to Federal Student Aid, a federal Direct Loan is “a federal student loan, made through the William D. Ford Federal Direct Loan Program, for which eligible students and parents borrow directly from the U.S. Department of Education at participating schools.”

What is the difference between Direct Subsidized Loans and Direct Unsubsidized Loans?

There are two types of federal Direct Loans available to students, subsidized and unsubsidized.

Subsidized Direct Loans

  • Students must demonstrate financial need to qualify for a subsidized loan
  • Only available to undergraduate students
  • The federal government will pay (subsidize) the interest that accrues on the loan (while the student is enrolled at least half time)
  • There is a 1.069% origination fee for loans borrowed between Oct 1, 2016 and Oct 1, 2017. Loans borrowed between Oct 1, 2017 and Oct 1, 2018 have an origination fee of 1.066%.

Unsubsidized Direct Loans

  • Unsubsidized loans are non-need-based.
  • Unsubsidized loans are available to both undergraduate and graduate students.
  • The student is responsible for paying the interest that accrues until the loan is paid in full.
    • The student can opt to pay the interest while in school or allow the interest to be capitalized (added to the principal of the loan) when he or she goes into repayment.
  • There is a 1.069% origination fee for loans borrowed between Oct 1, 2016 and Oct 1, 2017. Loans borrowed between Oct 1, 2017 and Oct 1, 2018 have an origination fee of 1.066%.

How do I apply for a Direct Loan?

The Free Application for Federal Student Aid (FAFSA) is used as the application for the Direct Loan Program. You must have a valid FAFSA on file and be enrolled at least half time to be eligible to borrow the Direct Loan. You will be notified of your Direct Loan eligibility via the award notification. If you wish to borrow all or a portion of your Direct Loan(s), you will need to complete all the steps listed below.

Steps to borrowing a Direct Loan

  1. File a valid FAFSA with USF’s school code 001832.
  2. Complete a Master Promissory Note (MPN) on Studentloans.gov.
  3. Complete entrance counseling on Studentloans.gov.

Once the MPN is signed, it is valid for 10 years while attending USF. After the MPN and entrance counseling are completed, you will automatically have loan funds you are eligible for disbursed to your student accounts each year unless you notify the Office of Financial Aid in writing that you wish to decline all or a portion of the loan.

Please take a look at the next-steps-loan-handout to help you complete your Entrance Counseling and Master Promissory Note for your Subsidized and Unsubsidized Direct loans.

When will I have to repay a Direct Loan?

Repayment for Direct loans begins after a student graduates or is enrolled at less than half-time. Students are not required to make payments on Direct Loans while they are enrolled at least half-time (at least 6 credit hours per semester). Students have a six month grace period prior to entering repayment on Federal Direct loans. The grace period begins when the student graduates, drops below half-time, or ceases to be enrolled.

What are the interest rates for Direct Loans?

Interest rates are established annually for each academic year, and this interest rate will apply for the life of the loan. Subsidized and unsubsidized loans have different interest rates. Undergraduate and graduate borrowers will also have different interest rates. Interest rates may vary from year to year, but undergraduate loans have a cap of 8.25% and graduate loans have a cap of 9.50%.

Subsidized Loans

  • 4.45% – Fixed interest rate for undergraduate borrowers for the 2017-2018 academic year

Unsubsidized Loans

  • 4.45% – Fixed interest rate for undergraduate borrowers for the 2017-2018 academic year
  • 6.00% – Fixed interest rate for graduate borrowers for the 2017-2018 academic year

How much can I borrow in Direct Loans?

Undergraduate (Dependent Students)

Completed Credit Hours Subsidized Maximum Unsubsidized Maximum Total Annual Direct Limit
1-29 $3,500 $2,000 $5,500
30-59 $4,500 $2,000 $6,500
60+ $5,500 $2,000 $7,500

Dependent students have an undergraduate aggregate lifetime limit of $31,000 (no more than $23,000 of which may be subsidized) for Direct Loan borrowing.

Undergraduate (Independent Students)

Completed Credit Hours Subsidized Maximum Unsubsidized Maximum Total Annual Direct Limit
1-29 $3,500 $6,000 $9,500
30-59 $4,500 $6,000 $10,500
60+ $5,500 $7,000 $12,500

Independent students have an undergraduate aggregate limit of $57,500 (no more than $23,000 of which may be subsidized) for Direct Loan borrowing.

Graduate (Independent Students)

Completed Credit Hours Subsidized Maximum Unsubsidized Maximum Total Annual Direct Limit
0+ Not eligible $20,500 $20,500

Graduate students have an aggregate lifetime limit of $138,500 in the Direct Loan program.

150% Direct Loan Subsidized Eligibility

As of July 1, 2013, first-time borrowers of Direct Subsidized Loans will have a limit to their subsidized loan eligibility. In addition to qualifying for subsidized loans, students will now also be limited to borrowing 150 percent of their program’s length in subsidized loans.

For example, if Johnny Cougar is enrolled in a bachelor’s degree program (four academic years) at USF, then he will have six academic years of subsidized loan eligibility because 150 percent of four years is six years.

USF degree programs include:

  • Two-year (associate degree) = three academic years of subsidized loan eligibility
  • Four-year (bachelor’s degree) = six academic years of subsidized loan eligibility

Subsidized loan eligibility is based on a student’s current program. If Johnny Cougar first enrolls in a two-year program and then switches to a four-year program, his subsidized loan eligibility would increase from three academic years to six academic years. However, if Johnny was first enrolled in a four-year program and then switched to a two-year program, his subsidized loan eligibility would decrease from six academic years to three academic years.

Students who are enrolled part time and receive a full academic year of subsidized loans will only have one half year of subsidized eligibility counted against their 150 percent eligibility.

Once students have used all of their 150 percent subsidized loan eligibility, they will still be eligible for Direct Unsubsidized Loans up to their maximum annual and lifetime limits. Students who run out of subsidized loan eligibility will also be responsible for paying any interest that accrues on their Direct Subsidized Loans after meeting the 150 percent limit.

For more information, please review Federal Student Aid’s announcement on this subject.

 

 

Note: Students who receive Federal Student Aid funding may lose eligibility if convicted of a federal or state drug offense.