How To Apply?
First of all, you need to file a FAFSA (Free Application for Federal Student Aid). Once done, you’ll be eligible to apply for student loans from the Direct Loans program offered by the government.
- File the FAFSA application on FAFSA.ed.gov.
- Get a letter from your school’s office which handles financial aids. Depending on your eligibility, this letter will provide you the details of the availability of funds.
- Next, contact your school to have them accept the financial aid that’s been approved.
- Review and sign necessary documentation like the MPN (Master Promissory Note).
Interest Rates And Fees
A good thing about the interest rates on Direct Subsidized Loans is that they’re fixed, meaning you’ll pay the same rate of interest over the life of the loan.
As of now, all direct loans disbursed between July 1st, 2019 to June 30th, 2020 feature a fixed interest rate of 4.53%. Moreover, there is a 1.059% loan fee charged on all such loans disbursed between October 1st, 2019 to September 30th , 2020.
The government funds the interest on these loans under the following circumstances:
- If you’re enrolled in an approved program at least half-time
- When you’ve the 6-month grace period after completing school
- When you’ve applied for the authorized deferment
How Much Can I Borrow?
For dependent and independent students, annual and total (cumulative) loan limits on direct subsidized loans are the same. The chart below exhibits the preset limits:
|Annual Limit By Year||Dependent Students||Independent Students|
|1st Year Undergraduate||$3,500||$3,500|
|2nd Year Undergraduate||$4,500||$4,500|
|3rd Year Undergraduate||$5,500||$5,500|
|Subsidized Aggregate Limit||$23,000|
$23,000 for undergraduates
$65,500 for graduates/professionals
How Do I Receive And What Can I Use The Funds For?
If you’re applying for the first time, you’ll need to attend an entrance counselling session prior to receiving the funds. If eligible, the funds will be transferred to your student account. Additionally, you’ll be required to sign an MPS.
The Federal Government will release the funds in two installments, directly credited to your student account. The total sum is sent over in the following order -
- Tuition and fees
- Room and board
- Additional school expenses
After disbursing the aforementioned, if there are any leftover funds, the remaining balance will be transferred to you via cash, check, debit card, or EFT.
What Are The Eligible Repayment Terms?
The standard repayment period for all direct loans is 10 years. You can also qualify for an extended term (25 years) if you consolidate all of your loans or have a total of $30,000 or more in federal loans.
According to the US Department of Education, all Direct Subsidized Loans are eligible to be repaid through any of the below mentioned ways -
You can also check the Federal Aid website for other eligible repayment plans.