DIRECT STUDENTS LOAN

What kinds of student loans are available?

For student borrowers, Direct Loans are either subsidized or unsubsidized. The Direct Loan Program offers Direct Stafford Loans (Direct Subsidized) and Direct Unsubsidized Stafford Loans (Direct Unsubsidized).

A subsidized loan is awarded on the basis of financial need . If you qualify for a subsidized loan, the federal government pays interest on the loan ("subsidizes" the loan) until you begin repayment and during authorized periods of deferment thereafter.

An unsubsidized loan is not awarded on the basis of need. If you qualify for an unsubsidized loan, you'll be charged interest from the time the loan is disbursed until it is paid in full. You can choose to pay the interest or allow it to accumulate. If you allow the interest to accumulate, it will be capitalized---that is, the interest will be added to the principal amount of your loan and will increase the amount you have to repay. If you pay the interest as it accumulates, you'll repay less in the long run.

You can receive a subsidized and an unsubsidized loan for the same enrollment period as long as they are from the same program---either both from the Direct Loan Program or both from the FFEL Program.

Who can get these loans?

If you're a regular (degree-seeking) student enrolled in an eligible program of study at least half time, you may receive either a Direct Loan or an FFEL Program Loan. You must also meet other general eligibility requirements.

Can I get both a Direct Loan and an FFEL Program Loan in the same enrollment period?

No. However, you could receive FFEL Program Loans one year and Direct Loans the next year.

How much can I borrow?

If you're a dependent undergraduate student you can borrow up to---
$2,625 if you're a first-year student enrolled in a program of study that is at least a full academic year;

$3,500 if you've completed your first year of study, and the remainder of your program is at least a full academic year;

$5,500 a year if you've completed two years of study, and the remainder of your program is at least a full academic year.

For periods of undergraduate study that are less than an academic year, the amounts you can borrow will be less than those just listed. Ask your financial aid administrator (FAA) how much you can borrow.

If you're an independent undergraduate student or a dependent student whose parents are unable to get a Loan, you can borrow up to---

$6,625 if you're a first-year student enrolled in a program of study that is at least a full academic year. (At least $4,000 of this amount must be in unsubsidized loans.)

$7,500 if you've completed your first year of study, and the remainder of your program is at least a full academic year. (At least $4,000 of this amount must be in unsubsidized loans.)

$10,500 a year if you've completed two years of study, and the remainder of your program is at least a full academic year. (At least $5,000 of this amount must be in unsubsidized loans.)

For periods of undergraduate study that are less than an academic year, the amounts you can borrow will be less than those just listed. Talk to your FAA to find out how much you can borrow.
NOTE: Direct Loans are not made to undergraduates enrolled in programs that are less than one-third of an academic year.

If you're a graduate student, you can borrow up to $18,500 each academic year. (At least $10,000 of this amount must be in unsubsidized loans.)

NOTE: The amounts given above are the maximum yearly amounts you can borrow in both subsidized and unsubsidized Direct Loans or FFEL Program Loans, singly or in combination. However, you can't borrow more than your cost of attendance minus any other financial aid for which you're eligible. This means that you may receive less than the annual maximum amounts.

The total debt you can have outstanding from all Direct Loans and FFEL Program Loans combined is---

$23,000 as a dependent undergraduate student;

$46,000 as an independent undergraduate student (no more than $23,000 of this amount may be in subsidized loans);

$138,500 as a graduate or professional student (no more than $65,500 of this amount may be in subsidized loans). The graduate debt limit includes any Direct Loans and/or FFEL Program Loans received for undergraduate study.

What's the interest rate charged on these loans?

For students whose Direct Loans were first disbursed on or after July 1, 1994, the interest rate is variable, but it will never exceed 8.25 percent. From July 1, 1994 through June 30,1995, the interest rate is 7.43 percent.

The interest rate is adjusted each year on July 1. You'll be notified of interest rate changes throughout the life of your loan.

If you have subsidized loans, the federal government pays the interest while you're enrolled in school at least half time, during a grace period, or during authorized periods of deferment. Interest will begin to accrue when you enter repayment.

If you have unsubsidized loans, you'll be charged interest from the day the loan is disbursed until it is repaid in full, including in-school, grace, and deferments periods. You may pay the interest during these periods, or it can be capitalized.

Is there a charge for these loans?

You'll pay a fee of up to 4 percent, deducted proportionately from each disbursement of your loan. A portion of this fee goes to the federal government to help reduce the cost of the loans. Also, if you don't make your loan payments when they're scheduled, you may be charged late fees and collection costs.

When do I pay back these loans?

After you graduate, leave school, or drop below half-time enrollment, you have six months before you begin repayment. This is called a grace period.

During the grace period on a subsidized loan, you don't have to pay any principal, and no interest will be charged. During the grace period on an unsubsidized loan, you don't have to pay any principal, but interest will be charged. You can either pay the interest or allow it to accumulate.

After you leave school or drop below half-time enrollment, you'll receive information about repayment and will be notified of the date repayment begins. However, you're responsible for beginning repayment on time, even if you don't receive this information.

Is it ever possible to postpone repayment of my loan?

Yes. Under certain circumstances, you can receive a deferment or forbearance on your loan. During a deferment, no payments are required. If you have a subsidized loan, the federal government will pay the interest that accrues during the deferment. If your loan is unsubsidized, you will be responsible for the interest on the loan during the deferment. If you don't pay the interest as it accrues, it will be capitalized. During forbearance, your payments are postponed or reduced. The government does not pay the interest; you are responsible for it, and if you don't pay the interest as it accrues, it will be capitalized. You can't receive a deferment or forbearance if your loan is in default.

See the Loan Deferment Summary for the list of deferments available if your loan was first disbursed on or after July 1, 1993. If your loans were disbursed prior to that date, the lender or agency holding your loans can tell you about the deferments that apply to those loans.

Deferments are not automatic. If you have a Direct Loan, you must contact the Direct Loan Servicing Center to request a deferment form. If you have an FFEL Program Loan, you must contact the lender or agency that holds your loan to request a deferment form. For either program, you'll have to provide documentation to support your request. You must continue making scheduled payments until you receive notification that the deferment has been granted.

Forbearance isn't automatic either. You may be granted forbearance if you're willing but unable to meet your repayment schedule and you're not eligible for a deferment. If you have a Direct Loan, contact the Direct Loan Servicing Center to request forbearance. You'll have to provide documentation to support your request for forbearance. You must make scheduled payments until you are notified that forbearance has been granted.

Can my Direct loan be discharged (canceled)?

Yes, in certain circumstances. A discharge releases you from all obligation to repay the loan. See the Discharge Cancellation Summary for a complete listing of discharge conditions.

Your loan can't be discharged because you didn't complete the program of study at the school, didn't like the school or the program of study, or didn't obtain employment after completing the program of study.

Repayment assistance (not a discharge, but another way to satisfy your obligation to repay) may be available if you serve in the military. For more information, contact your recruiting officer.

For more information about discharge or repayment assistance, Direct Loan borrowers can contact the Direct Loan Servicing Center.

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