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Federal Direct Subsidized/Unsubsidized Loans |
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Subsidized versus Unsubsidized: Both loans require the completion of the FAFSA to determine the financial need of the student. The subsidized Direct Loan is for students who have a demonstrated financial need, as determined by the FAFSA. The unsubsidized Direct Loan is a non-need-based loan. The subsidized Direct Loan is interest-free during the student's enrollment of at least half-time in a degree seeking program. Interest will begin to accrue if the student drops below half-time, or upon the completion of their program and the applicable grace period. The unsubsidized Direct Loan begins to accrue interest upon disbursement of the loan. The annual and lifetime aggregate loan limits are listed below.
Applicants who qualify for the federal subsidy on an amount less than the limits listed above may borrow the difference under the unsubsidized program. For example, if a first year student is eligible to borrow only $1,000 under the subsidized program, they may borrow an additional $2,500 under the unsubsidized program to receive a total Federal Direct Loan equal to $3,500. A student's annual Federal Direct Loan amount cannot exceed the cost of attendance minus other financial aid for which the student is eligible that year.
Interest Rates: For the 2011-2012 academic year, undergraduate subsidized Direct Loans have an interest rate of 3.4%. Unsubsidized undergraduate Direct Loans have an interest rate of 6.8%. All subsidized and unsubsidized Direct Loans for graduate students have an interest rate of 6.8%. Loan Fees: Both the subsidized and the unsubsidized Direct Loans have a 1% origination fee with an up-front rebate of .5%, resulting in a net origination fee of .5%. The fee is deducted from the loan proceeds at disbursement reducing the actual origination fee to .5%. Once the borrower enters repayment, they are eligible to keep the rebate if they make their first 12 payments on time. If they fail to make all 12 payments on time, the rebate fee is capitalized into the principal of the outstanding loan balance. Loan Eligibility: All Direct Loan borrowers must be a U.S. citizen or permanent resident, be enrolled at least half-time in a degree or certificate seeking program, not defaulted on a prior federal loan, and maintain satisfactory academic progress. Disbursement Terms: In a typical academic year, Federal Direct Loans are disbursed in two installments. When the academic period is for one semester or for the summer term, one disbursement is permitted at the beginning of the term. During the regular academic year (Fall/Spring Semesters) funds cannot disburse more than 10 days prior to the first day of class. For the summer term, funds cannot disburse more than 5 days prior to the first day of class. Grace Period: All subsidized and unsubsidized Direct Loans have a 6 month grace period, upon completion of the student's program of study. If the student drops below half-time enrollment or withdraws from the University, they will enter into their grace period prior to repayment of their loan.
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