Lets Understand Federal Student Loans!

Subsidized and unsubsidized loans are federal student loans for eligible students to help cover the cost of higher education at a four-year college or university, community college, or trade, career, or technical school. The U.S. Department of Education offers eligible students at participating schools Direct Subsidized Loans and Direct Unsubsidized Loans. 

Direct Subsidized Loans

• Available to undergraduate students with financial need 
• Your school determines how much you can borrow & the amount may not exceed your financial need 
• The U.S. Department of Education pays the interest on a Direct Subsidized Loan
• While you're in school at least half-time 
• For the first 6 months after you leave school (grace period), and 
• During a period of deferment 

*Borrowers of Direct Subsidized Loans first disbursed between July 1, 2012 and July 1, 2014 will be responsible for paying any interest that accrues during the grace period and will be added to the principal balance 

Direct Unsubsidized Loans 

• Direct Unsubsidized Loans are available to undergraduate and graduate students 
• There is no requirement to demonstrate financial need
• Your school determines the amount you can borrow based on your cost of attendance & other financial aid you receive 
• You are responsible for paying the interest on a Direct Unsubsidized Loan during all periods 
• If you choose not to pay the interest while attending school, during grade periods & deferment or forbearance periods, your interest will accrue and be capitalized (added to the principle amount of your loan) 

Are you eligible for a Direct Subsidized Loan or a Direct Unsubsidized Loan? 

• Enrolled at least half-time at a school that participates in the Direct Loan Program 
• Enrolled in a program that leads to a degree or certificate awarded by the school 
• Direct Subsidized Loans are only available to undergraduate students who have financial need 
• Direct Unsubsidized Loans are available to both undergraduates and graduate or professional degree students & are not required to show financial need 

How do I apply for a loan?
Complete & submit the Free Application for Federal Student Aid (FAFSA). Your school will use your FAFSA to determine how much student aid you are eligible to receive. Direct Loans are typically included as part of your financial aid package. 

What are the current interest rates?
Direct Subsidized Loans for Undergraduate Students - 3.86% 
Direct Unsubsidized Loans for Undergraduate Students - 3.86% 
Direct Unsubsidized Loans for Graduate Students - 5.41% 

Understanding interest rates & fees 
Information for military members & family 

Are there other fees for this loan other than interest? 
Yes. 
There is a 1.072% loan fee on all Direct Subsidized & Unsubsidized Loans & will be proportionately deducted from each loan disbursement. 
*Loans disbursed prior to December 1, 2013 have different loan fees 

So... How do I receive my money? 
The school will first apply your loan funds to your school account to pay for tuition, fees, room and board, & other school charges. If any additional funds remain, they will be returned to you. All loan funds must be used for education expenses! 
Learn more about the process of receiving federal student aid 

If your federal aid package includes your federal student loans, your school will tell you how to accept the loan. If it's your first time receiving a Direct Loan you must: 

• Complete entrance counseling 
• Sign a Master Promissory Note (MPN) 

Credit Advocates recommends you contact the school's federal aid office for details regarding the process for receiving a loan at your school. 

Is that is? Does anyone contact me?
when you receive your Direct Loan, you will be contacted by your loan servicer (who you repay your loan to). 

Yes. You must pay this back. There are several ways. 
There are several ways to repay your federal loans (private loans are different, Credit Advocates will review these soon). Your loan servicer can help you understand which repayment options are available to you. Generally you have 10-25 years to repay your loan depending on the repayment plan. 

Learn more about repayment options 
Understand deferment or forbearance options for those having trouble repaying their loans 

Define this Lingo. 

• Grace period - Period of time after borrowers graduate, leave school, or drop below half-time enrollment when they are not required to make payments on certain federal student loans 
• Deferment - Postponement of payment on a loan is allowed under certain conditions. Interest does not accrue on Direct Subsidized Loans, Subsidized Federal Stafford Loans, & Federal Perkins Loans - all other loans do accrue interest 
• Forbearance - Period during which your monthly loan payments are temporarily suspended or reduced. Your lender may grant you a forbearance if you are willing but unable to make loan payments due to certain types of financial hardship 
• Loan servicer - Company that collects payments on as loan, responds to customer service inquiries, & preforms other administrative tasks associated with maintaining a loan on behalf of a lender - click here if you are unsure of who your loan servicer is 
• Entrance counseling - A tool to ensure you understand your obligation to repay the loan 
• Master Promissory Note (MPN) - Agreeing to the terms of the loan 

Credit Advocates strives to educate the public on all credit & housing counseling matters. For all questions answered you can email me at rsimon@creditadvocates.org. 

rsimon@creditadvocates.org | creditadvocates.org  

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