Types of Federal Loan Programs
Subsidized Stafford Loan
The Office of Financial Aid awards subsidized loans based on financial need. The maximum amount a student may borrow in any single year as a subsidized loan is equal to the cost of attendance, minus the EFC, minus the sum of all forms of all scholarships, grants, and federal work-study already awarded, not to exceed the limits outlined below. The federal government does not charge interest while students are in school.
Unsubsidized Stafford Loan
The Office of Financial Aid does not award unsubsidized loans based on financial need. The federal government does not make interest payments for the borrower. The maximum a student may borrow in a single year is equal to the cost of attendance minus the sum of all forms of financial aid already awarded, not to exceed the limits outlined below. The federal government charges interest to the borrower from the time the loan funds are disbursed until the student pays it in full.
The amount students can borrow each year for subsidized and unsubsidized Stafford loans depends on their grade level and on whether they are dependent or independent students.
|Dependent student||Independent student|
|1st-year undergraduate||$3,500 / $2,000||$3,500 / $6,000|
|2nd-year undergraduate||$4,500 / $2,000||$4,500 / $6,000|
|3rd- and 4th-year undergraduate||$5,500 / $2,000||$5,500 / $7,000|
|Graduate/professional||NA||$8,500 / $12,000|
|1. This includes dependent students whose parents are unable to borrow a PLUS loan.
2. The first number is the base amount, which may be any combination of subsidized and unsubsidized loan funds. The second number is the amount of additional unsubsidized loan funds available. Prior to July 1, 2008, there was no additional amount for dependent students, while for independent undergraduate students the amount was $2,000 less than the above numbers (the amount for graduate students is unchanged).
The amount a student can borrow is also limited by the student’s school costs, other financial aid the student may receive, and (in the case of subsidized loans) the student’s expected family contribution.
These are the aggregate (total) limits for all subsidized and unsubsidized Stafford loans, whether solely from the Direct Loan Program or in combination with FFEL Stafford loans:
- $31,000 for a dependent undergraduate student (no more than $23,000 may be subsidized)
- $57,500 for an independent undergraduate student1 (no more than $23,000 may be subsidized)
- $138,500 for a graduate or professional student (no more than $65,000 may be subsidized; includes loans for undergraduate study)
With a PLUS loan, a graduate/professional student or the parent of a dependent student can borrow up to the cost of the student’s education minus other financial aid the student receives.
The interest rate for loans disbursed between July 1, 1998, and June 30, 2006, will continue to be adjusted each year on July 1, though for Stafford loans it will never be higher than 8.25%. However, Stafford loans disbursed on or after July 1, 2006, have a fixed interest rate of 6.8%, with the exception that subsidized loans disbursed on or after July 1, 2008, to undergraduate students will have an interest rate of 6.00%. The current subsidized loan interest rate is 3.4%. The current unsubsidized interest rate is 6.8%, Direct PLUS Loans have a fixed rate of 7.9%.
In addition to interest, you pay a net loan origination fee of 1.0% of the principal amount of each Direct Subsidized or Unsubsidized Stafford Loan that you borrow. The net loan origination fee for PLUS loans is 4.0%. This fee helps reduce the cost of making these low-interest loans. We deduct the fee before you receive any loan money, so the loan amount you actually receive will be less than the amount you have to repay.
Federal Perkins Loan
The Office of Financial Aid awards Perkins loans based on financial need. Repayment begins nine months after a student graduates, withdraws, or drops below half time enrollment. Students can defer repayment for certain kinds of federal and volunteer service. Undergraduate students may borrow up to $5,500 per year for all levels. The cumulative maximum is $20,000. The interest rate is 5.0%, and begins with the first loan repayment. There is no processing fee on Perkins loans. For more detailed information go to www.studentaid.ed.gov
Direct loans are low interest, convenient, flexible and simple. The lender is the U.S. Department of Education rather than a bank or financial institution. The federal government provides four types of direct loan financing.
These direct loans vary in criteria and repayment schedules:
The Federal Direct Subsidized Stafford/Ford Loan is a direct loan, which means you do not pay the interest on the loan while you are in school at least part-time. This particular type of direct loan is based on the student financial need in accord with federal regulations.
The Federal Direct Unsubsidized Stafford/Ford Loan is a direct loan which is charged interest by the government while the student is in school. The student does not need to be in extreme financial need to receive this type of loan. In order to receive the direct loans, you must be enrolled at least half time, and you must meet the general eligibility requirements for the Federal Student Aid Programs by completing the FAFSA. The maximum a student can borrow each school year depends on the students grade level and other factors. The school will disburse the loan money to the student’s account and is usually disbursed in two installments Direct Subsidized and Direct Unsubsidized loans have a 6 month grace period that starts the day after the student graduates, leaves school, or drops below half-time enrollment. The student does not have to make payments until the grace period ends. The federal government offers four repayment plans. The student can change plans at any time and there is no pre-payment penalty. For more detailed information students may contact Borrower Services at the Direct Loan Servicing Center at 1-800-848-0979 or visit Direct Loans on the Web at www.dl.ed.gov
The Federal Direct PLUS loan is a direct loan designed for parents without an adverse financial history who wish to borrow money for their dependent student. Parents can borrow up to the cost of attendance. The interest rate is fixed and charged during all periods beginning the date of disbursement. In addition to interest, you pay a loan origination fee that is a percentage of the principle amount of each Direct Plus Loan that you receive. This fee helps reduce the cost of making these low interest loans. The fee is deducted before you receive any loan money, so the amount you receive will be less than the amount you have to repay.
The school will disburse the loan money by crediting to your student’s account; any additional money will then go directly to you. Loan money will usually be disbursed in at least two installments. Parents have the option to postpone repayment until 6 months after the beneficiary student leaves school or drops below half-time enrollment. If payments are postponed, interest will accrue and be capitalized on the unpaid loan balance. PLUS Loans generally must be repaid within 10 years. A Parent PLUS Loan may be discharged if the student for whom the loan was obtained dies. In order for a student to be dependent he or she may not be 24 years or older, a graduate or professional student, someone with legal dependents, an orphan or a ward of the court. Parents of independent students are not eligible to apply for this type of loan.
The Federal Direct Consolidation loan is a consolidation of one or more federal loans combined into a direct loan. A single monthly payment is made to the U.S. Department of Education. It is to the student’s advantage to consolidate, due to lower interest rates.
Direct loans give you the simplicity of having one contact for concerns with your financial assistance. You are able to have access to your direct loan information on-line 24 hours a day, 7 days a week. You are given the flexibility to choose your repayment options and are able to change your schedule as your needs change.
ADDITIONAL CONTACT INFORMATION
Federal Student Aid Information Center
Student Aid on the Web
For repayment of your Direct Loans
Borrower Services at the Direct Loan Servicing Center
Direct Loans on the Web
For Direct Consolidation Loans
Direct Loan Consolidation Center
Direct Loan Consolidation Website