What is a federal direct subsidized loan?

A Federal Direct Subsidized Loan is a type of loan that the government pays the interest on the loan while the student is in school, during the six-month grace period after graduation and during any deferment periods.

As of July 1, 2012, this loan is only available to undergraduate students due to changes in federal legislation.


What is a federal direct unsubsidized loan?

An Unsubsidized Loan is a type of loan that the government does not pay the interest while the student is enrolled. The student has the option to either pay the accruing interest monthly or allow the interest to capitalize (to be added to the principal). Required payments do not begin until six months after graduation or six months after the student drops below half-time enrollment.


Annual Federal Loan Limits


What is the “150%” change regarding federal direct subsidized loans?

The 150 percent change means students in a four-year program will be eligible for subsidized student loans for the equivalent of six years – three years for students in a two-year program. The student who reaches this limitation could continue to receive unsubsidized Stafford loans if he or she is otherwise eligible (for example, has not run afoul of the school’s satisfactory academic progress requirements).

Once a borrower has reached the 150 percent limitation, his or her eligibility for an interest subsidy also ends for all outstanding subsidized loans that were disbursed on or after July 1, 2013. At that point, interest on those previously borrowed loans would begin to accrue and would be payable in the same manner as interest on unsubsidized loans.

The new limitation is prospective in nature, affecting new borrowers on or after July 1, 2013 (i.e., presumably borrows who do not have any outstanding federal student loans as of that date). Since only periods for which the student received subsidized loans appear to count, the 150 percent limit would likely include periods of borrowing that began on or after July 1, 2013. The bill also addresses transfer students. For borrowers who were enrolled in more than one educational program that began on or after July 1, 2013, the limitation would be calculated by taking the difference between 150 percent of the published program length of the longest educational program in which the borrower was enrolled and any periods of enrollment in which the borrower received a subsidized Stafford loan.

The legislation mandates that the Department of Education issue regulations on how to determine the aggregate period of eligibility for less than full-time students, students enrolled in preparatory coursework necessary for enrollment in a program leading towards a degree, and students enrolled in a teacher certification program who are not also regular students at the institution. Such regulations are exempt from negotiated rulemaking and not subject to Master Calendar provisions.


What is the verification policy for federal Title IV funds?

Verification is a requirement of the U.S. Department of Education and is the process of confirming information submitted on the Free Application for Federal Student Aid (FAFSA) for various Federal Title IV Funds including the Federal Direct Subsidized. Student applicants should be aware that this federal regulation requires them to submit tax data and other requested information to the Office of Financial Aid before processing of student loan applications and/or the awarding of funds. Students must submit the required information to complete the verification process no later than 45 days before the last day of the student’s enrollment.

Items to be verified include: adjusted gross income from the IRS form; U.S. income taxes paid; number of family members for whom parents provide more than half of their support; the number of children in post secondary schools who are enrolled at least half time; dependency status; untaxed income; eligible non-citizen status and any other item for which conflicting information has been submitted to the Office of Financial Aid. Any change in eligibility as a result of verification will be noted in The Nest.

If a student utilizes the IRS data retrieval process on the FAFSA, downloads and submits the IRS Income Tax Information into their FAFSA, the tax transcript requirements will be waived.  Click here for instructions.

Documents Required

  • Student and parent’s or spouse prior/prior year IRS Tax Transcript
  • Verification Form
  • Additional documentation may be requested. Please check The Nest
    • If the student or parent/stepparent/spouse did not file taxes, a signed non-tax filer statement and copies of all W-2 forms must be submitted. Non-taxable income verification may be requested.

Are graduate students eligible for a federal direct subsidized loan?

Graduate students are no longer eligible to receive the Federal Direct Subsidized Loan effective on or after July 1, 2012. Graduate students in a Masters Program and Post-Master’s Certificate Programs may be eligible for up to $20,500 per year in Federal Direct Unsubsidized Loans and students in Post-Bach Certificate Programs may be be eligible for up to $12,500 per year.


Are the direct subsidized/unsubsidized or PLUS loans financed through SJU?

No, the Direct Subsidized/Unsubsidized and PLUS Loans are financed through the federal government.


How can I find more information about federal direct subsidized/unsubsidized loans for undergraduate students?

Direct Lending Master Promissory Note (log into Manage my Direct Loan)
The information that students submit on their Free Application for Federal Student Aid (FAFSA) determines their eligibility for one or a combination of these programs. The Direct Subsidized/Unsubsidized Loan requires no credit or income requirement and is a low- or no-interest loan while the student is enrolled. The interest rate is fixed at 5.05% percent for Direct subsidized loans and 5.05% percent for Direct unsubsidized loans first disbursed on or after July 1, 2018 through June 30, 2019 (Note:  The interest rate was fixed at 4.45% for loans with first disbursements between July 1, 2017-June 30, 2018). Students may borrow a maximum of $5,500 for their first year under all programs. Sophomores may borrow $6,500 per year, while juniors, seniors, and fifth-year undergraduates may borrow up to $7,500 per year. The total aggregate amount a dependent undergraduate may borrow is $31,000. Federal Direct Subsidized Loan recipients have their interest paid by the federal government while they are in school. Repayment of principal and interest begins six months after the student graduates or ceases to be enrolled for at least six credits a semester. Federal Direct Unsubsidized Loans accrue interest while students are in school. The student has the option to pay the interest on their loan while they are in school. Repayment of principal and interest begins six months after the student graduates or ceases to be enrolled for at least six credits. There is no pre-payment penalty for advanced or accelerated repayment.

Additional Federal Direct Unsubsidized Loan
Dependent students whose parents are unable to obtain a PLUS Loan due to credit problems may borrow an additional amount of the Direct Unsubsidized Loan. The additional Direct Unsubsidized Loan is also available to independent undergraduates. The annual maximum amounts available are: Freshmen $4,000, Sophomores $4,000, Juniors $5,000, and Seniors $5,000.

The Consolidated Appropriates Act, 2012 which was signed into law on December 23, 2011, affects the grace period for Federal Direct Subsidized/Unsubsidized Loans which are first disbursed on or after July 1, 2012 and before July 1, 2014.  Federal Direct Subsidized/Unsubsidized Loans will still begin repayment 6 months after graduation or dropping below half time, however interest will accrue on the Federal Direct Subsidized loans during this time. 


How can I find more information about federal direct unsubsidized loans for graduate students?

Click here for information.


How do I complete my federal loan requirements for direct subsidized/unsubsidized/PLUS loans?

  • Go to http://studentloans.gov and click “Sign In” – Use your FSA ID to sign in
    • All borrowers are required to complete both Loan Counseling and a Loan Agreement for their Federal Direct Loans.
  • Select “Complete Loan Counseling”
    • Complete “Entrance Counseling” by clicking start.
  • Select “Loan Agreement”
    • Select the appropriate Master Promissory Note (MPN) for your type of loan.

Once this is complete, you will get an e-mail confirmation from Direct Loans – make sure that all steps have been completed.  If you receive the confirmation e-mail, you do not need to check with SJU on the status of the loan.


I thought I already completed entrance counseling on studentloans.gov. Why are you stating I have not completed it?

Many students complete financial awareness counseling, which is another option on studentloans.gov and it designed as a follow-up session for upperclassmen students who have already completed entrance counseling.  If you have completed financial awareness counseling in lieu of direct loan entrance counseling, you will need to complete entrance counseling.  All first time borrowers at SJU are required to complete entrance counseling.  Go to studentloans.gov for detailed instructions.


What are the entrance and exit counseling requirements for federal direct subsidized/unsubsidized loans?

Entrance and Exit counseling for students receiving Federal Loans is available at:  http://studentloans.gov/myDirectLoan/index.action

The Higher Education Amendments of 1986 stipulate that institutions must conduct entrance and exit counseling for all students borrowing under the Federal Direct Subsidized/Unsubsidized Loan program.

Direct Lending Subsidized/Unsubsidized Entrance Counseling needs to be completed prior to the crediting of the student’s first disbursement. This counseling is intended to give student loan borrowers pertinent information about the terms and conditions of the loan, the borrower’s responsibilities, and the importance of meeting repayment obligations. During counseling, students will also receive sample repayment tables that can be used to estimate monthly payments and information on when loan repayment begins.

Prior to graduation or upon withdrawal from the University, student borrowers will be provided with Direct Lending Subsidized/Unsubsidized Exit Counseling information. The counseling is provided to prepare the student loan borrower for repayment. Information provided will include repayment options, deferment options, loan consolidation, consequences of default, and communication with the lender and/or loan services.

Click here to view a short video on Exit counseling that explains the Repayment process for loans.


What are the loan fees on the direct subsidized/unsubsidized loans (Stafford) and direct PLUS loans?

This amount will be deducted from the total amount taken by the government and the net amount will show on a student’s bill.

Loan Type

First Disbursement Date

Loan Fee

Direct Subsidized Loans and Direct Unsubsidized Loans

On or after 10/1/17 and before 10/1/18

1.066%

On or after 10/1/18 and before 10/1/19

1.062%

Direct PLUS Loans

On or after 10/1/17 and before 10/1/18

4.264%

On or after 10/1/18 and before 10/1/19

4.248%