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Direct Loans

Federal Direct and Federal Direct Plus Loans

Direct Subsidized Loan – Available to undergraduate students that demonstrate financial need. The U. S. Department of Education pays the interest on this loan (subsidized):

  • while you’re in school at least half-time,
  • for the first six months after you leave school (referred to as a grace period), and
  • during a period of deferment (a postponement of loan payments)

Direct Unsubsidized Loan – Available to undergraduate students, but does not require financial need to be demonstrated for eligibility. The student is responsible for paying the interest on an unsubsidized loan during all periods. If you chose not to pay the interest while you are in school and during grace periods and deferment or forbearance periods, your interest will accrue (accumulate) and be capitalized (that is, your interest will be added to the principle amount of your loan).

Direct Plus Loan – Available to dependent undergraduate students, but does not require financial need to be demonstrated for eligibility. The application can be submitted via www.studentloans.gov using the FAFSA credentials to access the application. The borrower must not have negative credit history and will be responsible for interest during all periods with payments starting immediately upon signing the MPN. The maximum amount is the cost of attendance minus any other financial aid a student receives.

NOTE: All direct loans assess a loan fee where the amount of the fee varies depending on when the loan is disbursed. The unsubsidized and parent plus loans interest rate varies depending on the loan period of disbursement.

For interest rates and loan fees charts, please visit StudentAid.gov.

150% Limit on Subsidized Direct Student Loans

Only first-time borrowers on or after July 1, 2013 are subject to the new provision. Generally, a first-time borrower is one who did not have an outstanding balance of principal or interest on a Direct Loan or on a FFEL Program Loan on July 1, 2013.

Background: On July 6, 2012, the Moving Ahead for Progress in the 21st Century Act (MAP-21) (Public Law 112-141) was enacted. MAP-21 added a new provision to the Direct Loan statutory requirements (see HEA section 455(q)) that limits a first-time borrower’s eligibility for Direct Subsidized Loans to a period not to exceed 150 percent of the length of the borrower’s educational program. Under certain conditions, the provision also causes first-time borrowers who have exceeded the 150 percent limit to lose the interest subsidy on their Direct Subsidized Loans. This new provision is in addition to the aggregate limit on Direct Subsidized Loans of $23,000.

What it means: 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.” Your maximum eligibility period is based on the published length of your current program. You can usually find the published length of any program of study in your school’s catalog.

For example, if you are enrolled in a four-year bachelor’s degree program, the maximum period for which you can receive Direct Subsidized Loans is six years (150 percent of 4 years = 6 years). 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.

Certain types of enrollment may cause you to become responsible for the interest that accrues on your Direct Subsidized Loans when the U.S. Department of Education usually would have paid it.

For more information please visit the Subsidized Direct Loan information page on www.studentaid.gov and the explanation sheet from the Department of Education.