Federal Direct Loans are intended to help students and families offset the rising cost of college tuition. Criteria for eligibility includes:
- Completion of–
- a FAFSA
- a Direct Loan Request form
- appropriate financial counseling (new borrowers)
- a promise to repay the funds (Master Promissory Note – good for 10 years)
- Be enrolled for at least six credits in an eligible certificate or degree program
- Be making Satisfactory Academic Progress (SAP)
Students with unmet financial need can obtain a subsidized Federal Direct Loan. This means the U.S. Department of Education will pay the interest charges on this type of loan as long as the student is enrolled at least half-time (six or more credits) and for a six-month period after graduation or dropping below half-time (grace period), as well as during periods of approved deferment. At the end of the grace period, repayment of the loan will begin and interest begins to accrue to the student borrower. Repayment may extend up to ten years but borrowers must make payments of at least $50 per month.
Students who do not qualify for the subsidized (need-based) Federal Direct Loan can obtain an unsubsidized (non need-based) Federal Direct Loan. Unsubsidized Loan students are responsible for the interest obligation while enrolled. The student, while enrolled on at least a half-time basis (six or more credits), may pay interest only or have the interest capitalized (added to the principal).
All Federal Direct loan borrowers must complete an Exit Loan Counseling Session upon graduation or withdrawal. Repayment begins six months after a student leaves school due to graduation or any other reason; or drops below half-time level. All loan applicants must have completed a Free Application for Federal Student Aid (FAFSA) form and may not have defaulted on prior loans or borrowed their maximum lifetime amounts as determined by the Federal government. Students may not borrow more than the cost of their education minus other financial aid awarded them. The Financial Aid Office must approve all federal loans and reserves the right to refuse loan applications due to academic deficiency or evidence that a student may have difficulty managing loan debt. To apply for a Direct Loan, students must meet basic eligibility criteria.
Federal Direct Loans are not to be used as a mechanism for securing enrollment for a student who files their FAFSA late (June 1st-Priority Filing Date). A student must have a payment method in place to pay for classes at the time tuition is due.
*As a result of legislation enacted in July 2012, eligibility for the Direct Loan interest subsidy will be limited for new borrowers effective July 1, 2013. The law restricts the period of time for which a borrower may receive subsidized loans, in the aggregate, to 150 percent of the published length of the student’s current educational program. Once the student reaches that limit, he or she may borrow only unsubsidized loans, and interest begins to accrue on the student’s outstanding subsidized loan.