Federal Direct Loan (Subsidized and Unsubsidized)
Undergraduate students may obtain a Federal Direct Loan, regardless of financial need, from the U.S. Department of Education. General eligibility, as well as eligibility for an interest subsidy, are determined through the filing of the FAFSA. Subsidized loans, are loans made to eligible undergraduate students who demonstrate financial need to help cover the costs of higher education at a college, and do not accrue interest during periods of at least half-time enrollment and lender-approved deferments.
Unsubsidized loans begin accruing interest as soon as the loan is disbursed. The borrower is responsible for the interest and may elect to make interest-only payments during periods of enrollment or defer making interest payments until repayment of the principal amount commences.
Federal Direct Subsidized Loans for undergraduate students and Federal Direct Unsubsidized Loans disbursed between July 1, 2015, and June 30, 2016, carry a fixed 4.29 percent interest rate. For loans first disbursed between October 1, 2015 and September 30, 2016, the Department of Education charges an origination fee of 1.068% of the gross loan amount disbursement. Interest rates for October 1, 2016 through September 30, 2017 have yet to be determined but is anticipated to be announced in July 2016.
Dependent first-year students may borrow a maximum of $5,500 per year, with no more than $3,500 eligible for subsidy; sophomores may borrow up to $6,500 per year, with no more than $4,500 eligible for subsidy; and juniors and seniors may borrow up to $7,500 per year, with no more than $5,500 eligible for subsidy. Students considered independent for financial aid purposes may borrow additional amounts.
Further information on the terms or repayment of a Federal Direct Loan can be found on the student loans website.