Home > Financial Aid > Student Loans > Direct Loans

Direct Loans

The Direct Subsidized and Direct Unsubsidized Loans, sometimes known as Stafford Loans, are the most popular low-interest federal loans. These loans are offered to undergraduate and graduate students. They are insured by the federal government and offers flexible repayment options. Schools that participate in the William D. Ford Federal Direct Loan Program offer these loans.

ADVERTISEMENT

Subsidized vs. Unsubsidized Loans

There are two types of Direct Loans: subsidized and unsubsidized. Depending on household income as reported in the FAFSA, a student can be eligible for one or both varieties of student loans. The school specifies for which loans the student is eligible. Due to rates and repayment policy, Direct Loans are the second thing a student should pursue, after conducting a scholarship search. If you aren't able to completely fund your college education with scholarships, the Direct Loan is the first loan option you should consider.

Direct Subsidized Loans are need-based loans. The government pays the interest on the loan while the student is in school, in deferment (if applicable), and during the sixth-month grace period after graduation and before repayment begins.

Direct Unsubsidized Loans are not based on income and not all students are eligible for the maximum loan amount. Eligibility is determined by the student’s year in school, other financial aid awards, and the estimated cost of attendance. Students who borrow Unsubsidized Loans are responsible for all interest that accumulates while they are in school, in deferment, and during the grace period. Students can take out both subsidized and unsubsidized loans as long as they don’t exceed yearly Direct Loan borrowing limits.

Borrowing Limits

Each year, dependent undergraduate students except students who are unable to obtain PLUS Loans can borrow up to:

  • $5,500 for first-year students enrolled in a program of study that is at least one full academic year. Only $3,500 of that can be subsidized loans.
  • $6,500 if you've completed your first year of study and the remainder of your program is at least one full academic year. Only $4,500 of that can be subsidized loans.
  • $7,500 if you've completed at least two years of study and the remainder of your program is at least one full academic year. Only $5,500 of that can be subsidized loans.

Each year, independent undergraduate students or dependent students whose parents were unable to get a PLUS Loan can borrow up to:

  • $9,500 if you're a first-year student enrolled in a program of study that is at least one full academic year. Only $3,500 of that can be in subsidized loans.
  • $10,500 if you've completed your first year of study and the remainder of your program is at least one full academic year. Only $4,500 of that can be in subsidized loans.
  • $12,500 if you've completed two years of study and the remainder of your program is at least one full academic year. Only $5,500 of that can be in subsidized loans.

Graduate students, who are automatically considered independent students, can take out up to $20,500 in unsubsidized loans only.

Interest Rates and Fees

Interest rates on current Direct Subsidized Loans at the undergraduate level, first disbursed on or after July 1, 2018 and before July 1, 2019 are fixed at 5.05%.

Interest rates on current Direct Unsubsidized Loans at the undergraduate level, first disbursed on or after July 1, 2018 and before July 1, 2019 are fixed at 5.05% Interest rates for Direct Unsubsidized Loans at the graduate or professional level are fixed at 6.6%

In addition to interest rates, there are loan fees charged to 1.066% for loans first disbursed on or after Oct. 1, 2017 and before Oct. 1, 2018 and 1.062% for loans first disbursed on or after Oct. 1, 2018, and before Oct. 1, 2019.

Eligibility Requirements

Students are eligible for federal loans based on the following criteria:

  • Demonstrate financial need (for Direct Subsidized Loans.)
  • A U.S. citizen or eligible noncitizen with a valid Social Security number.
  • Enrolled at least half-time at an eligible school and maintaining satisfactory academic progress.
  • Registered with Selective Service (if borrower is a male under age 25.)
  • Sign the certification statement on the FAFSA stating that you are not in default on any federal student loans, that you do not owe money on a federal student grant, and that you will use federal student aid only for educational purposes.
  • Show qualification to receive a college education by displaying a high school diploma or GED.

Loan Repayment

Students have a six-month grace period after graduating, leaving school, or dropping below half-time status. After this time, payments must be made. During the grace period, interest will not be charged on subsidized loans but will be charged on unsubsidized loans. Payments are due on a monthly basis. Under certain circumstances, e.g. health problems, a student may be eligible for loan deferment.

ADVERTISEMENT

Latest College & Financial Aid News

Scholarships.com's Weird Scholarships Part Two

January 21, 2021

by Izzy Hall

There are a lot of scholarships out there, some more conventional than others. Last time, we discussed a scholarship for students interested in becoming part of the chicken industry, but even that scholarship is far from the weirdest. There are some scholarships out there that have unusual criteria, to say the least. It may be based on something totally out of your control, like your height or last name. It may be awarded on how much you like a card game, or to whomever comes up with the most creative way to use a household product. It may even be for students interested in… potatoes? No joke, these five scholarships are some of the weirder ones on our site. Are you weird enough to apply? [...]

A Scholarship for Chicken?

January 19, 2021

by Izzy Hall

There are scholarships for everything on Scholarships.com; for every major, every community and every kind of student. In fact, we even offer a scholarship for students interested in the chicken industry. [...]

Medical School Applications Rise Dramatically During Pandemic

January 13, 2021

by Izzy Hall

Across the country, medical schools have seen a dramatic surge in candidates applying to their programs. After almost a year of dealing with the worldwide effects of COVID-19, it appears that the coronavirus has driven students to apply to academic programs that lead to careers as doctors, nurses and public health professionals. [...]

Last Reviewed: January 2021