Federal Direct Loans
Federal Direct Subsidized Loans are need-based loans. The government pays the interest on the loan while the student is enrolled at least half-time and during other authorized periods called deferments. The amount of loan offered is based on academic grade-level. Students borrowing Federal Direct loans on or after July 1, 2012 but before July 1, 2014 do not receive this subsidy during the 6-month grace period due to sequestration. Loans disbursing on or after July 1, 2014 will receive the subsidy during the 6-month grace period. Once the grace period has been used, generally interest begins accruing on the principle as soon as the student is no longer enrolled or has dropped below half-time enrollment.
Federal Direct Unsubsidized Loans are available to students in addition to Direct Subsidized Loans and are not need-based. Also, all students are offered $2,000 in Direct Unsubsidized Loans for the academic year. The government does not pay the interest; the student can choose to either pay the interest while in school or have the interest added to the loan principal to be repaid later.
Federal Direct PLUS Loans are fixed-rate loans provided by the Department of Education to graduate students and parents of dependent undergraduate students. The lender must perform a minimal check of the borrower’s credit history. There is a 10-year repayment schedule, and deferment options are available. For graduate students, payments are automatically deferred while in school. All students must file a FAFSA in order for eligibility to be determined.
Additional Direct Loan Eligibility
If a parent is denied a Parent Direct PLUS Loan, the dependent undergraduate student can be treated as an independent student and may be eligible for additional Direct Unsubsidized Loans. The student must contact our office if they would like to explore this funding option.
Interest Rates & Fees
The origination fee for a Direct Loan is 1.066% for loans originated on or after October 1, 2017 and before October 1, 2018. For loans originated on or after October 1, 2016 and before October 1, 2017, the origination fee was 1.069%.
The interest rates for Direct Loans with a first disbursement date on or after July 1, 2017 and before July 1, 2018 are:
- 4.45% on Subsidized & Unsubsidized Undergraduate Direct Loans
- 5.31% on Unsubsidized Graduate Direct Loan
PLUS Loans with a first disbursement date on or after July 1, 2017 and before July 1, 2018 will have an interest rate of 7.0%.
The origination fee for a Federal Direct PLUS Loan is 4.264% on or after October 1, 2017 and before October 1, 2018. For loans originated on or after October 1, 2016 and before October 1, 2017, the origination fee for a Federal Direct PLUS Loan was 4.276%.