If you decide to apply for a loan, make sure you understand its terms and conditions. The federal government can provide student loans. Loans offered by the federal government, known as federal student loans, generally provide borrowers with lower interest rates and more flexible repayment options than banks or other private sources.
Subsidized and Unsubsidized Loans
The US Department of Education offers low-interest loans to qualifying students to help pay for college or career school.
Students can get subsidized or unsubsidized loans based on their financial needs.
Subsidized and unsubsidized loans are federal student loans for eligible students to help pay for their education at a four-year college or university, a two-year community college, a school of professional studies, or in a school of technical studies. The U.S. Department of Education offers Direct Subsidized Loans and Direct Unsubsidized Loans to eligible students at participating schools.
Direct Subsidized Loans
Direct Subsidized Loans are available to undergraduate students with financial needs. Your institution determines the amount of money you can borrow, which cannot exceed your calculated financial need. When you take out a Direct Subsidized Loan, the US Department of Education pays the interest:
As long as you are studying at least part-time; during the six months after leaving the university (known as the grace period*); and during an extension period (postponement of loan payments).
*Note: If you were approved for a Direct Subsidized Loan and received your first disbursement between July 1, 2012, and July 1, 2014, you will be responsible for paying any interest earned during the grace period. If you decide not to pay the accrued interest during the grace period, it will be added to your principal.
Direct Unsubsidized Loans
They are available to undergraduate and graduate students, who are not required to demonstrate financial need. Your institution determines the amount of money you can borrow based on your study expenses and if you receive any other financial aid. You will be responsible for paying the interest on the Direct Unsubsidized Loan at all times. If you decide not to pay the interest while you are studying or during the grace, extension or deferment periods, this interest will be accumulated and capitalized (that is, added to your principal).
Am I eligible to apply for a Direct Subsidized or Unsubsidized Loan?
In order to apply for any of these loans, you must be enrolled at least half-time at an institution that participates in the Direct Loan Program. Generally, you must also be enrolled in an academic program leading to a degree or certificate awarded by the institution. Direct Subsidized Loans are only available to undergraduate students with financial needs. Direct Unsubsidized Loans are available to undergraduate students and to graduate or professional students. You do not have to demonstrate financial need in order to obtain a Direct Unsubsidized Loan.
Is there a time limit that determines how long I can receive the loan?
If this is your first time applying for a loan and you apply on or after July 1, 2013, there will be a maximum period of time (measured in academic years) during which you can obtain Direct Subsidized Loans. This time limit does not apply to Direct Unsubsidized Loans or Direct PLUS Loans. If this time limit applies to you, you will not be able to obtain Direct Subsidized Loans for more than 150 percent of the duration of your academic program, as published. This is known as your “maximum eligibility period.” Your maximum eligibility period is based on the duration of the academic program in which you are enrolled, as published. This information is usually found in the catalog of the institution you attend.
For example, if you are enrolled in a four-year high school, the maximum period of time you can take out Direct Subsidized Loans is six years (150 percent of 4 years = 6 years). If you are enrolled in a two-year associate degree, the maximum period of time you can take out Direct Subsidized Loans is three years (150 percent of 2 years = 3 years).
Because your maximum eligibility period is based on the length of the study program in which you are enrolled, your maximum eligibility period may change if you transfer to a study program of a different length. Also, if you already receive Direct Subsidized Loans for one program of study and then transfer to another program, the Direct Subsidized Loans you received for the first program will generally be counted toward your new maximum eligibility period.
Certain types of tuition may cause you to be responsible for interest earned on your Direct Subsidized Loans when it is normally paid by the US Department of Education. These enrollment patterns are described below.
How do I apply for a loan?
To apply for a direct loan, you must first fill out and submit the Free Application for Federal Student Aid (FAFSA). Your institution will use the information from it to determine the amount of financial aid you can afford. receive. Direct loans are usually included in your financial aid package. For more information, go here.
How much can I borrow?
Your institution determines the loan type(s), if any, as well as the actual loan amount you may receive each academic year. However, there are limits on the amount of subsidized and unsubsidized loans you can receive each academic year (annual maximum amount) and on the total amounts you can borrow; while doing undergraduate and graduate studies (maximum accumulated loan amount). The actual loan amount for which you are eligible each academic year may be less than the maximum annual loan amount. These limits may vary according to the year you are studying and whether or not you are a dependent or independent student.
If you are a dependent student whose parents do not qualify for a Direct PLUS Loan(Direct PLUS Loan), you may be able to receive additional funds from a Direct Unsubsidized Loan.
If the total amount you receive during the course of your education reaches the maximum cumulative loan amount, you will not be eligible for additional loans. However, if you pay off some of your loans so that your outstanding debt is below the Maximum Loan Amount, then you may be able to borrow again until you reach the balance allowed under the Maximum Loan Amount.
The following table shows the annual and cumulative maximum amounts for subsidized and unsubsidized loans.
What are the current interest rates?
For loans prior to July 1, 2016 click here for more information.
In addition to the accrued interest, are there any additional charges for this loan?
Yes, there is a 1% per loan fee on all Direct Subsidized and Unsubsidized Loans. This loan charge will be deducted proportionally from each disbursement.
What are the next steps to receive my loan?
If your financial aid package includes federal student loans, your institution will tell you what you need to do to accept the loan. If this is your first time applying for a direct loan, you will need to:
Complete income counseling, a tool to ensure you understand your obligation to repay the loan.
Sign a Promissory Note ( Master Promissory Note or MPN ) through which you accept the conditions of the loan.
Contact your institution’s Financial Aid Office for more details on the process for obtaining a loan.
How will I receive my loan?
The institution will first credit your loan funds to your account with the institution to pay for tuition, fees, room, and board, and other institutional charges. If there is a surplus, a check will be issued to you. All loan funds must be used for study costs.
Who will contact me once I receive my loan?
When you receive your direct loan, your loan servicer will contact you (you will pay your loan to the loan servicer). Your loan servicer will provide you with regular updates on the status of your direct loan, as well as any additional direct loans you
When do I have to pay my loan?
Once you graduate, drop out, or stop enrolling at least half-time, you’ll have a six-month grace period before you have to start repaying your loan. During this time, your loan servicer will send you information regarding your loan payment and notify you when your first payment is due. Payments are normally made monthly.
What types of payment plans are available?
There are several payment options designed to meet the individual needs of borrowers. Your loan servicer can explain what payment options are available to you. Generally, you will have between 10 and 25 years to repay your loan, depending on the repayment plan you choose.
What happens if I have problems paying my loan?
If you are unable to repay your loan as scheduled, contact your loan servicer immediately. Your loan servicer can explain your options for staying current on payments. For example, you can change your payment plan to lower your monthly payment, or you can request a payment extension or deferment that allows you to temporarily suspend or lower loan payments.
Can I cancel a loan if I decide that I no longer need it or that I need less than the amount offered?
You can cancel all or part of your loan at any time.
Is it possible to forgive or cancel my debt?
Under certain conditions, you may be eligible to have all or part of your debt discharged or forgiven (canceled).