Federal Loans

When you apply for financial aid, loans may be offered as part of your financial aid package. A loan is money you borrow and must pay back with interest. The U.S. Department of Education’s federal student loan program is the William D. Ford Federal Direct Loan Program. Under this program, the U.S. Department of Education is the lender. You may accept, accept in part, or deny offered loans. 

Direct Subsidized Loans vs. Direct Unsubsidized Loans

Direct Subsidized loan - A loan for which the government pays the interest while you are in school, during grace periods, and during any deferment periods.

Direct Unsubsidized loan - A loan for which you are responsible for paying all of the interest that accrues from the date of the first disbursement until the loan is paid in full.

Direct PLUS Loans

Direct PLUS Loans may be available to eligible parents and graduate or professional students. A Direct PLUS Loan is commonly referred to as a parent PLUS Loan when made to a parent, or as a grad PLUS Loan when made to a graduate or professional student. Parents must not have an adverse credit history. A credit check will be conducted. If a parent is denied the loan during the credit check, additional federal loan eligibility may be made available in the student's name.

The maximum PLUS Loan amount you can receive is the cost of attendance (determined by the school) minus any other financial aid received.

Loan Interest Rates and Calculations

Interest is a loan expense charged for the use of borrowed money. Interest is paid by you, the borrower, to the U.S. Department of Education, the lender. The expense is calculated as a percentage of the unpaid principal amount of the loan.

Interest rates for Direct Loans first disbursed on or after July 1, 2024 and before July 1, 2025.

Loan type Borrower type Fixed interest rate
Direct Subsidized and Direct Unsubsidized Loans Undergraduate 6.53%
Direct Unsubsidized Loans Graduate 8.08%
Direct PLUS Loans Parents and Graduate or Professional Students 9.08%

The amount of interest that accrues (accumulates) on the loan between monthly payments is determined by a daily interest formula. This formula consists of multiplying the loan balance by the number of days since the last payment was made and multiplying that result by the interest rate factor.

Simple daily interest formula: Interest Amount = (Outstanding Principal Balance x Interest Rate Factor) x Number of Days Since Last Payment

The interest rate factor is used to calculate the amount of interest that accrues on the loan. It is determined by dividing the loan's interest rate by the number of days in the year.

Federal Direct Loan Fees

In addition to interest there is a loan fee applied to direct loans. The loan fee is a percentage of the loan amount and is proportionately deducted from each loan disbursement. You’re responsible for repaying the entire amount you borrowed and not just the amount you received. The percentage varies depending on when the loan is first disbursed, as shown in the chart below.

Loans first disbursed prior to Oct. 1, 2019, have different loan fees.

Loan type First disbursement date range Loan fee
Direct Subsidized and Direct Unsubsidized Loans 10/1/2020 - 10/1/2024 1.057%
10/1/2019 - 10/1/2020 1.059%
Direct PLUS Loans 10/1/2020 - 10/1/2024 4.228%
10/1/2019 - 10/1/2020 4.236%

Direct Loan Limits

There are limits on the amount in subsidized and unsubsidized loans that you may be eligible to receive each academic year (annual loan limits) and the total amounts that you may borrow for undergraduate and graduate study (aggregate loan limits).

Academic year, grade level classification Credit hours Total subsidized and unsubsidized loans available to dependent Students1 Subsidized limit for dependent students Total subsidized and unsubsidized loans available to independent Students2 Subsidized limit for independent students
Freshman Undergraduate Annual 0- 29.9 $5,500 $3,500 $9,500 $3,500
Sophomore Undergraduate Annual 30 – 59.9 $6,500 $4,500 $10,500 $4,500
Junior Undergraduate Annual 60-89.9 $7,500 $5,500 $12,500 $5,500
Senior Undergraduate Annual 90+ $7,500 $5,500 $12,500 $5,500
Graduate or Professional Students Annual N/A N/A3 N/A $20,500 (unsubsidized only) N/A
Undergraduate subsidized and unsubsidized Aggregate N/A $31,000 $23,000 $57,500 $23,000
Graduate and professional student subsidized and unsubsidized aggregate N/A N/A N/A $138,5004 $65,500

1Except students whose parents are unable to obtain PLUS Loans

2And dependent undergraduate students whose parents are unable to obtain PLUS Loans

3All graduate and professional students are considered independent

4The graduate aggregate limit includes all federal loans received for undergraduate study

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