The Federal Direct Stafford Loan program – today’s version of the Guaranteed Student Loan program – is the primary federal loan option for undergraduate students. Except for a few rare exceptions, all U.S. citizens and eligible non-citizens who submit a valid Free Application for Federal Student Aid (FAFSA) will qualify for Direct Stafford Loans. Students do not have to demonstrate financial need to qualify for a Direct Stafford Loan.
Q & A
How much can an undergraduate student borrow through the Federal Direct Loan program?
The maximum amount that an undergraduate student can borrow each year in Federal Direct Stafford loans depends on the student’s grade level and on dependency status.
The loan limits for dependent undergraduate students are as follows:
• First year students can borrow a total of $5,500 up to $3,500 of which might have subsidized interest.
• Sophomores can borrow a total of $6,500 up to $4,500 of which might have subsidized interest.
• Juniors can borrow a total of $7,500 up to $5,500 of which might have subsidized interest.
• Seniors can borrow a total of $7,500 up to $5,500 of which might have subsidized interest.
The loan limits for independent undergraduate students are as follows:
• First year students can borrow a total of $9,500 up to $3,500 of which might have subsidized interest.
• Sophomores can borrow a total of $10,500 up to $4,500 of which might have subsidized interest.
• Juniors can borrow a total of $12,500 up to $5,500 of which might have subsidized interest.
• Seniors can borrow a total of $12,500 up to $5,500 of which might have subsidized interest.
What if the student needs more than four years to graduate?
The aggregate loan limits are $31,000 ($23,000 subsidized) for dependent undergraduate students and $57,500 ($23,000 subsidized) for independent undergraduate students so that leaves an additional $5,000 for dependent students and $12,500 for independent students who have borrowed the maximum in each of the first four years.
This means that a dependent undergraduate who borrows the maximum amount for the first four years ($27,000) will have only $4000 in remaining Direct Loan eligibility for a fifth year.
What is the difference between a Subsidized Direct Loan and an Unsubsidized Direct Loan?
When a Direct Loan is “subsidized,” it means that the government pays the interest that accrues while the student is enrolled at least half-time. The student is not responsible for any interest until he/she graduates or drops below half-time enrollment status. The student is responsible for the interest that accrues after graduation or whenever he/she falls below half-time enrollment status
When a Direct Loan is “unsubsidized,” the student is responsible for the interest that accrues from the date of the first loan disbursement. The student may pay the interest quarterly while enrolled in school or opt to defer the interest payments until after graduation – but either way the student is responsible for paying all the interest that accrues.
Who determines how much of the loan is subsidized and how much is unsubsidized?
Because the subsidized portion of a direct loan is considered “need-based aid” the financial aid office at each school will determine the amount of subsidized loan eligibility for each student. Their decision will be based on the school’s cost of attendance, the student’s FAFSA EFC and the amount of other financial aid awarded.
So, a dependent first-year student who demonstrates sufficient financial need will qualify for $3,500 in a subsidized loan and an additional $2,000 in an unsubsidized loan.
A dependent first-year student who demonstrates no financial need will still qualify for the full $5,500 but the interest will be unsubsidized. All other terms and conditions are exactly the same.
Are the interest rates the same for Subsidized Direct Loans and Unsubsidized Direct Loan?
Yes. Congress has passed and the President has signed the Bipartisan Student Loan Certainty Act of 2013, which ties federal student loan interest rates to financial markets. Under this Act, interest rates will be determined each spring for new loans being made for the upcoming award year, which runs from July 1 to the following June 30. Each loan will have a fixed interest rate for the life of the loan.
For Direct Loans (both subsidized & unsubsidized) made on or after July 1, 2020, and before July 1, 2021, the interest rate for undergraduates is 2.75%.
Are there any fees?
Yes. There is a loan origination fee on all Direct Subsidized Loans and Direct Unsubsidized Loans. The loan fee for loans disbursed between October 1, 2017 and October 1, 2018 is 1.069% and is proportionately deducted from each loan disbursement. This means that when you borrow $5,500, only $5407 is disbursed to the school.
Are the repayment terms the same for Subsidized Direct Loans and Unsubsidized Direct Loan?
Yes. Except for the interest subsidy all terms and conditions are the same.
When do I have to begin repaying my Direct Stafford Loans?
The first payment is due 6 months after you graduate or fall below half-time status.
How long is the repayment term on my Direct Stafford Loans?
Generally, you’ll have from 10 to 25 years to repay your loan, depending on which repayment plan (there are several) you choose. If you do not choose a repayment plan, you will be placed on the standard repayment plan, with fixed monthly payments for up to 10 years. Most Direct Loan borrowers choose to stay with the standard repayment plan, but there are other options for borrowers who may need more time to repay or who need to make lower payments at the beginning of the repayment period.
You can change repayment plans at any time by contacting your loan servicer.
How much is a typical monthly payment?
Your monthly student loan payment will depend on the total amount you borrow and the repayment plan you choose. You may refer to the Typical Repayment page for a view of typical repayment scenarios or visit one of the calculator tools we reference in the margin to run your own scenarios.
What happens if I attend graduate or professional school?
If you enroll at least half-time in an eligible post-secondary school, you will qualify for a deferment.
A deferment is a postponement of payment on a loan, during which interest does not accrue if the loan is subsidized.
This means that you stop making your loan payments when you begin your new program and no interest accrues on the subsidized portion of your federal loans. Interest will still accrue on the unsubsidized portion of your loans.
Your loan payments resume upon graduation or whenever your enrollment status falls below half-time.