Federal Direct Loans are a kind of financial aid that allows students to borrow money directly from the federal government to help pay for their education. There are two types of Federal Direct Loans that a student may be eligible to receive: subsidized and unsubsidized.
How do I apply for a Federal Direct Loan?
A student can apply for Federal Direct Loans by completing and submitting their FAFSA for the school year in which they want to receive loan funds.
How do I accept the Federal Direct Loan offered in my financial aid package?
Once a student has been offered Federal Direct Loans as a part of their financial aid package, they can accept those loans by completing the following four-step process:
- Accept (or decline) your loan. Log on to banweb.mtu.edu, select the Financial Aid tab and appropriate school year, and then click View/Accept Awards. Select accept (or decline), then submit your decision.
- Complete a Direct Loan Request Form. Once you have accepted the Direct Loan, a prompt will appear on the screen, asking you to complete the Direct Loan Request Form.
- Complete Entrance Counseling. First-time borrowers must complete entrance counseling before loan funds can be applied to their student bill. Complete your counseling by logging in with your FSA ID at studentloans.gov and clicking on Complete Loan Counseling. Be sure to select Entrance Counseling, not Financial Awareness Counseling. The counseling session will take about 30 minutes to complete.
Complete your Master Promissory Note. You will be notified via email when your Master Promissory Note (MPN) is ready. It may take some time after completing the above steps for your MPN to be ready. Complete your MPN by logging in with your FSA ID at studentloans.gov and clicking on Complete Loan Agreement. Be sure to select MPN for Subsidized/Unsubsidized Loans.
What is the difference between a subsidized loan and an unsubsidized loan?
- The subsidized loan is based on financial need. The federal government does not charge interest on the loan while the student is enrolled at least half-time and during periods of deferment.
- The unsubsidized loan is not based on financial need. The federal government charges interest on the loan while the student is enrolled and during periods of deferment. Students may choose to pay the interest on an unsubsidized loan as it is charged or to allow the interest to be added to the balance of their loan.
What must I do to be eligible to receive a Federal Direct Loan?
How much can I borrow?
The amount a student can borrow depends on their grade level and their FAFSA dependency status. If a student is enrolled in their final semester before graduation, the amount they are allowed to borrow may have to be prorated. The amount a student is allowed to borrow may also have to be adjusted if their total financial aid package, including their loans, is more than their cost of attendance.
What is the interest rate on my Federal Direct Loan?
The interest rate for Federal Direct Loans that are paid out between July 1, 2020, and June 30, 2021, is:
- Undergraduate Subsidized: fixed at 2.75%
- Undergraduate Unsubsidized: fixed at 2.75%
- Graduate Unsubsidized: fixed at 4.30%
What is the origination fee for my Federal Direct Loan?
- The loan origination fee for a Federal Direct Subsidized or Unsubsidized Loan disbursed between October 1, 2019 and September 30, 2020 is 1.059 percent of the amount borrowed.
- The loan origination fee for a Federal Direct Subsidized or Unsubsidized Loan disbursed between October 1, 2020 and September 30, 2021 will be 1.057 percent of the amount borrowed.
- This fee is charged by the federal government to cover the cost of processing the loan. The federal government deducts this fee prior to the loan paying out, so the actual amount the student receives from their Federal Direct Loan will be less than the amount they will have to repay.
Is there a limit on how long I can receive Federal Direct Subsidized Loans?
Yes. For students borrowing Federal Direct Loans for the first time on/after July 1, 2013, there is a limit on the maximum period of time (measured in academic years) that a student can receive Federal Direct Subsidized Loans. In general, students may not receive Federal Direct Subsidized Loans for more than 150% of the published length of their program. For more information regarding the 150% limitation on Federal Direct Subsidized Loans, please click here.
To whom will my Federal Direct Loan information be disclosed?
Information about loans for students and parents will be reported to the National Student Loan Data System. That information will be accessible by authorized guaranty agencies, lenders, and schools.
How can I find out who the loan servicer is for my Federal Direct Loan?
The US Department of Education contracts with multiple centers to provide service for the Federal Direct Loan Program. Once the first Direct Loan is received, borrowers will be contacted by the servicer for that loan. The loan servicer will provide regular updates on the status of the Direct Loan, and also on any subsequent Direct Loans that are received. To confirm which center is servicing the loan, log onto the National Student Loan Database. To view the current servicing centers contracted by the Department of Education, click here.
When will I have to complete Exit Counseling for my Federal Direct Loan?
Borrowers of Federal Direct Loans are required to complete Exit Counseling when they graduate, leave school, or drop below half-time enrollment.
When will I have to start repaying my Federal Direct Loan?
Students must start repaying their Federal Direct Loans starting six months after they graduate, leave school, or drop below half-time enrollment. Multiple repayment plans are available.
Where can I find additional information about Federal Direct Loans?
For further information about your Federal Direct Loans, please visit the Department of Education's Federal Student Loans Basics for Students.