Federal Loans

1. Purpose and Eligibility:

Direct Subsidized Loans, commonly known as "subsidized loans," are federal student loans offered through the U.S. Department of Education. These loans are intended to provide financial assistance to undergraduate students with demonstrated financial need. To be eligible for Direct Subsidized Loans, you must meet the following criteria:

• Be a U.S. citizen or eligible non-citizen.

• Have a valid Social Security Number.

• Enroll in an eligible degree or certificate program at a participating institution.

• Maintain satisfactory academic progress (SAP).

• File the Free Application for Federal Student Aid (FAFSA) to demonstrate financial need.

2. Interest Subsidy:

One of the defining features of Direct Subsidized Loans is the interest subsidy provided by the federal government. This means that while you are enrolled at least half-time in an eligible program, during the six-month grace period after leaving school, and during certain deferment periods (e.g., during active duty military service), the government pays the interest on your subsidized loans. This interest subsidy makes these loans particularly advantageous for borrowers because it prevents the loan balance from growing while you're in school and during specific other periods.

3. Fixed Interest Rates:

Direct Subsidized Loans typically have fixed interest rates, meaning the rate remains constant throughout the life of the loan. The interest rates for federal student loans are set by Congress and can vary from year to year. Borrowers can check the current interest rates on the Federal Student Aid website or through their loan servicer.

4. Borrowing Limits:

The amount you can borrow in Direct Subsidized Loans depends on your year in school and your dependency status (whether you are considered a dependent or independent student). The annual and aggregate (total) limits are determined by law and are subject to change. Generally, first-year undergraduate students can borrow less than upperclassmen and graduate students.

5. Repayment Options:

Direct Subsidized Loans offer flexible repayment options to help borrowers manage their loan payments after leaving school. These options include:

• Standard Repayment: Fixed monthly payments over a ten-year term.

• Graduated Repayment: Payments start lower and increase over time.

• Extended Repayment: Fixed or graduated payments over an extended term (up to 25 years).

• Income-Driven Repayment (IDR) Plans: Payments are based on your income and family size, making them more manageable if your income is lower or unpredictable. Click here for more information about IDR plans.

• Public Service Loan Forgiveness (PSLF): If you work in a qualifying public service or nonprofit job and make 120 qualifying payments, your remaining loan balance may be forgiven.

Use this Loan Simulator to see your federal student loan repayment options. You can also learn more about repayment options here.

6. Loan Fees:

Direct Subsidized Loans may have loan fees, which are deducted from each disbursement. However, these fees are typically lower than those associated with private loans.

7. Application Process:

To apply for Direct Subsidized Loans, you must complete the Free Application for Federal Student Aid (FAFSA). The FAFSA determines your eligibility for federal financial aid, including grants and loans. Ensure that you meet application deadlines to maximize your aid opportunities.

8. Loan Counseling:

Before receiving your first Direct Subsidized Loan, you are required to complete entrance counseling. This counseling session provides essential information about your rights and responsibilities as a borrower, loan terms, and repayment options.

9. Master Promissory Note (MPN):

To officially accept a Direct Subsidized Loan, you must sign a Master Promissory Note (MPN). This legally binding document outlines the terms and conditions of the loan, including interest rates and repayment details.

10. Grace Period:

Direct Subsidized Loans have a six-month grace period that begins after you graduate, leave school, or drop below half-time enrollment. During this period, you are not required to make loan payments, and interest is subsidized by the government.

11. Responsibilities of Borrowers:

Borrowers of Direct Subsidized Loans have several responsibilities, including:

• Maintaining enrollment in an eligible program.

• Keeping the loan servicer updated on changes in contact information.

• Understanding and meeting the repayment terms.

• Monitoring loan balances and progress toward loan forgiveness, if applicable.