Direct Loans are low-interest loans for students and parents to help pay for the cost of a student's education beyond high school. The lender is the U.S. Department of Education (“the Department”) rather than a bank or other financial institution. Direct Loans are the most common form of loans for undergraduate students seeking financial aid to fund their higher education.
With Direct Loans, you:
There are two types of Direct Loans: Direct Subsidized Loans, for which the government pays the interest while you are in college; and Direct Unsubsidized Loans, for which you are responsible for paying all the interest on the loans, during college and after. You may receive both types of loans at the same time.
Direct Subsidized Loans are awarded to undergraduate students who demonstrate financial need as determined by the FAFSA. The federal government pays the interest of these loans while you are in college and during the six-month grace period after you graduate, leave school, or enroll as a less-than-half-time student. The government also pays your interest costs during deferment. To qualify for Direct Subsidized Loans, you must meet all the requirements for federal student financial aid and you must qualify for need-based financial aid.
Direct Unsubsidized Loans are available to all eligible students and do not require students to demonstrate financial need. You are responsible for paying all the interest on an unsubsidized loan, but you can allow it to accumulate while you're in college and during the grace period. If you do, the interest will be "capitalized" — that is, added to the amount you borrowed when repayment begins, and future interest will be based on the new, higher loan amount.
For more information, visit www.studentloans.gov.
The Direct Parent Loan for Undergraduate Students (“Direct PLUS Loan”) enables parents or stepparents to borrow up to the total cost of their dependent child's education, minus any other aid the student may receive. Direct PLUS Loans are for undergraduate study only.
For more information, visit www.studentloans.gov.
To receive loan funds, you must be enrolled at least as a half-time student and you must complete the Free Application for Federal Student Aid (FAFSA) at www.fafsa.ed.gov to determine your eligibility. If you are deemed eligible for federal loans, you will have the option of enrolling in a Direct Loan program when you receive your award offer letter. Thereafter, you must complete a Master Promissory Note at www.studentloans.gov in order to receive Direct Loans.
See Applying for Financial Aid for more information.
Once you have determined your eligibility for Direct Loans and enrolled in a Direct Loan program, the Department of Education will disburse the agreed-upon loan amounts to your bank account throughout the academic school year.
Loans are disbursed in equal installments of at least two installments per academic year. For instance, at DigiPen, half of your annual Direct Loan is disbursed at the beginning of the fall semester and the other half is disbursed at the beginning of the spring semester.
Keep disbursement dates in mind while calculating student living expenses for your first month at school, as loan funds may not be immediately available to release to the student. DigiPen’s Accounting Department requests Direct/PLUS Loans the first week of fall and spring semester. Once the money is disbursed, the Accounting Department deducts all tuition and fees due to the school, then issues the student (in the case of Direct loans) or parents (in the case of Direct PLUS loans) any excess funds for living expenses within 14 days. Parents can elect to have the refund amount directly applied to the student’s account by signing the Direct PLUS Loan authorization form attached to the award offer letter.
In general, be prepared to cover living expenses for the month of September (fall semester) and January (spring semester) of every school year until your loans are credited to your account.
Students may choose to have excess financial aid funds issued back to the government instead of issued toward their bank account. If you decide that you do not want your excess funds to obtain books and supplies, you must indicate this by email or in writing prior to the start of each semester term. Please address your letter to the Office of Financial Aid at email@example.com.
Unlike undergraduates, graduate students are not eligible for Direct Subsidized Loans, but graduate students may be eligible for Direct Unsubsidized Loans and Direct Graduate PLUS Loans. The process to apply for graduate Direct Loans is nearly identical to the undergraduate process, and can be completed at www.studentloans.gov.
All information related to federal student aid programs (including Subsidized, Unsubsidized, PLUS, and Graduate PLUS Loans) is reported to the National Student Loan Data System (NSLDS), whether the borrower is a student or parent. The NSLDS is accessible to guaranty agencies, lenders, and institutions determined to be authorized users of the data system. Students and parents may obtain access to this website to track individual loans at www.nslds.ed.gov.