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:
STEP ONE - Accept (or decline) your loan. Log on to MyMichiganTech.mtu.edu, and select the Financial Aid tab and the appropriate aid year. In the Current Financial Aid section click View/Accept Awards in the upper right hand corner. Select accept (or decline), then submit your decision.
STEP TWO - Complete a Direct Loan Request Form. Once you have accepted the Direct Loan, you will be prompted to complete the Direct Loan Request Form.
STEP THREE - Complete Entrance Counseling. First-time borrowers must complete entrance counseling before funds can be disbursed. Complete your counseling by logging in with your FSA ID (the one used for the FAFSA) at studentaid.gov and clicking on Complete Entrance Counseling located under the Complete Aid Process tab. The counseling session will take about 30 minutes to complete. This is a one-time requirement and will not need to be completed in following aid years.
STEP FOUR - Complete your Master Promissory Note. First-time borrowers are required to complete a Master Promissory Note (MPN). You will be notified via email when your MPN is ready. You will need your FSA ID (the one used for the FAFSA) to complete the MPN. You will be asked to provide your permanent address, telephone number, driver’s license number (if you have one), and email address. You will also need the names, addresses, and telephone numbers of two personal references who have known you for at least three years. References must have different addresses from one another, and one of the references should be a parent or legal guardian. The references have no obligation to the loan and are only contacted if your contact information is not current.
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, 2021, and June 30, 2022, will be:
- Undergraduate Subsidized: fixed at 3.73%
- Undergraduate Unsubsidized: fixed at 3.73%
- Graduate Unsubsidized: fixed at 5.28%
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, 2020 and September 30, 2021 is 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.