By completing the FAFSA, you will be considered for the Federal Stafford Loan program. Direct Loans are funded by the U.S. Department of Education through your college and are managed by a loan servicer. There are two types of Federal Stafford Loans: Direct Subsidized Loans and Direct Unsubsidized Loans. Find the details about both programs to make an informed decision about funding your college education.
Direct Subsidized Loans
Your eligibility for the Direct Subsidized Loan is based on your financial need and your undergraduate academic level. Repayment is deferred until six months after you graduate or cease to be enrolled at least half-time, and the government pays the interest while you are enrolled in school. Direct Subsidized Loan maximums vary according to academic level and dependency status. In addition, there are lifetime loan limits.
Time Limit to Receive Subsidized Loans
If you are a first-time borrower on or after July 1, 2013, there is a limit on the maximum period of time (measured in academic years) that you can receive Direct Subsidized Loans. This time limit does not apply to Direct Unsubsidized Loans or Direct PLUS Loans. If this limit applies to you, you may not receive Direct Subsidized Loans for more than 150 percent of the published length of your program. This is called your “maximum eligibility period.”
For example, if you are enrolled in a two-year associate degree program, the maximum period for which you can receive Direct Subsidized Loans is three years (150 percent of 2 years = 3 years). Because your maximum eligibility period is based on the length of your current program of study, your maximum eligibility period can change if you change to a program that has a different length. Also, if you receive Direct Subsidized Loans for one program and then change to another program, the Direct Subsidized Loans you received for the earlier program will generally count toward your new maximum eligibility period.
Direct Subsidized Loan Limit
Direct Unsubsidized Loans
Your eligibility for the Direct Unsubsidized Loan is not based on financial need. You may borrow the cost of education minus all other financial aid you receive, up to the Direct Loan maximum for your academic level. The interest on the Direct Unsubsidized Loan accrues from the date of disbursement. You have two choices for paying interest: you may pay it while you are enrolled full-time, or it can accrue and become part of the principal that you will owe. You begin making payments six months after you graduate or cease to be enrolled at least half time.