Federal Loans

1. Purpose and Eligibility:

Direct Subsidized Loans are federal student loans offered through the William D. Ford Federal Direct Loan Program. They are available to eligible undergraduate students who demonstrate financial need.

To be eligible, a student generally must:

• Be a U.S. citizen or eligible noncitizen.

• Have a valid Social Security number, unless an exception applies.

• Be enrolled at least half-time in an eligible undergraduate degree or certificate program.

• Meet the general eligibility requirements for federal student aid.

• Maintain satisfactory academic progress (SAP).

• Complete the Free Application for Federal Student Aid (FAFSA).

Eligibility and loan amounts are determined by the institution based on financial need, cost of attendance, enrollment, grade level, annual and aggregate loan limits, and other financial aid received.

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 a student may borrow through the Direct Subsidized Loan Program depends on the student’s grade level, dependency status, financial need, cost of attendance, remaining eligibility, and applicable annual and aggregate federal loan limits.

Direct Subsidized Loans are available only to eligible undergraduate students. Graduate and professional students are not eligible to receive Direct Subsidized Loans.

Beginning with the 2026–27 award year, federal annual loan limits must be reduced proportionally when a student is enrolled less than full-time. Students must still be enrolled at least half-time to receive a Direct Subsidized Loan disbursement. Changes in enrollment may therefore reduce the amount a student is eligible to borrow.

Annual and aggregate loan limits are established by federal law and are subject to change.

5. Repayment Options:

Repayment options depend on when the borrower received the loans, the types of federal loans held, and other borrower-specific circumstances. Available options may include:

• A standard or tiered standard repayment plan with scheduled monthly payments.

• An income-driven repayment plan, including the Repayment Assistance Plan (RAP), when the borrower and loans are eligible.

• Other repayment plans available to borrowers with qualifying older federal loans.

• Public Service Loan Forgiveness (PSLF) for borrowers who work full-time for a qualifying employer and make 120 qualifying monthly payments while meeting all other program requirements.

Federal repayment-plan availability is changing under federal law. Some existing repayment plans are being phased out, and not every borrower will qualify for every plan. Borrowers should use the Federal Student Aid Loan Simulator or contact their federal loan servicer to determine which repayment options are available for their loans.

Additional information is available on the Federal Student Aid repayment plans webpage.

6. Loan Fees:

Direct Subsidized Loans have a federal loan origination fee. The fee is deducted proportionately from each loan disbursement, so the amount credited to the student’s account will be less than the amount borrowed. The borrower remains responsible for repaying the full amount of the loan.

Current loan fee information is available on the Federal Student Aid website.

7. Application Process:

To be considered for a Direct Subsidized Loan, a student must complete the Free Application for Federal Student Aid (FAFSA). The institution will use FAFSA information and other eligibility criteria to determine whether the student qualifies and the amount the student may borrow.

If offered a Direct Subsidized Loan, the student must accept the loan through the institution’s financial aid process and complete all applicable requirements, including entrance counseling and a Master Promissory Note. Students should complete the FAFSA and any additional institutional requirements by applicable deadlines.

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.